UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

þ		Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-19672

 

American Superconductor Corporation

(Exact name of registrant as specified in its charter)

Delaware		04-2959321
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
64 Jackson Road, Devens, Massachusetts		01434
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)

(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 þ 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 Registrant’s common stock:

Common Stock, par value $0.01 per share		50,868,708
Class		Outstanding as of September 15, 2011

 

 

AMERICAN SUPERCONDUCTOR CORPORATION
FORM 10-Q/A
EXPLANATORY NOTE

     This Amendment No. 1 to the American Superconductor Corporation (the “Company”) Quarterly Report on Form 10-Q (“Form 10-Q/A”) amends its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010, which was filed on November 4, 2010 (“Original Form 10-Q”). This Form 10-Q/A includes restated unaudited condensed consolidated financial statements, related notes, key financial data and management’s discussion and analysis of the Company for the three and six months ended September 30, 2010 in order to correct certain accounting errors. The Company is concurrently filing an amended Form 10-Q with the Securities and Exchange Commission (the “SEC”) with respect to the three and nine months ended December 31, 2010, to restate its unaudited condensed consolidated financial statements, related notes, key financial data and management’s discussion and analysis of financial condition to correct accounting errors in those periods. Further, the Company is filing its Annual Report on Form 10-K for the fiscal year ended March 31, 2011 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 after the SEC’s due date for such filings. Readers are strongly urged to read this Form 10-Q/A, the amended Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2010, the Annual Report on Form 10-K for the fiscal year ended March 31, 2011 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 together for a more complete understanding of the Company’s financial condition.

     The Company amended its Quarterly Reports on Form 10-Q and delayed filing the Annual Report on Form 10-K as a result of its determination that revenues were incorrectly recorded during the periods covered by those reports. Specifically, the Company determined that at the time of product shipment to certain of its customers in China during the second and third quarters of the Company’s fiscal year ended March 31, 2011, the fees related to the shipments were not fixed or determinable or collectability was not reasonably assured. As a result, the Company should have recognized the revenues related to those shipments on a cash basis of accounting with cash applied first against accounts receivable balances, as in the case of Sinovel as of September 30, 2010, then costs of shipments (inventory and value added taxes) before recognizing any gross margin. The Company has restated the applicable revenues, cost of goods sold, inventory, accounts receivable and other accounts during the periods affected. Included in the restatement adjustments for the three months ended September 30, 2010, is an increase in the provision for excess and obsolete inventory of $0.6 million and a write-off of certain prepaid value added taxes of $0.2 million that relate to amounts due from certain of its customers in China which the Company determined were not recoverable as of September 30, 2010. In addition, the Company recorded an adjustment of $1.8 million to increase property, plant and equipment and accrued expenses related to the implementation of the Company’s new enterprise resource planning system.

     The restatement adjustments had the following impact on the Company’s financial statements for the three and six months ended September 30, 2010:

	•		decreased revenues by $3.5 million,
	•		decreased net income by $2.1 million,
	•		decreased basic and diluted net income per share by $0.05,
	•		decreased total assets by $0.4 million, including:

	•		decreased accounts receivable by $3.5 million,
	•		increased inventory by $0.8 million,
	•		decreased prepaid expenses and other current assets by $0.2 million,
	•		increased deferred tax assets by $0.7 million, and
	•		increased property, plant and equipment by $1.8 million

	•		increased total liabilities by $1.8 million, and
	•		decreased total stockholders’ equity by $2.2 million as of September 30, 2010.

     The accounting errors and their impact to the unaudited condensed consolidated financial statements are more fully described in Note 2, “Restatement,” of the notes to unaudited condensed consolidated financial statements included in Item 1 of this amended Quarterly Report on Form 10-Q.

     The restatement adjustments had the following impact on the Company’s financial statements for the three and nine months ended December 31, 2010:

	•		decreased revenues by $82.6 million and $86.1 million, respectively,
	•		decreased net income by $34.2 million and $36.3 million, respectively,
	•		decreased basic and diluted net income per share by $0.71 and $0.78, respectively,
	•		decreased total assets by $67.3 million, including;

	•		decreased accounts receivable by $95.1 million,
	•		increased inventory by $36.8 million,
	•		increased prepaid expenses and other current assets by $5.8 million
	•		increased current and long-term deferred tax assets by $3.8 million,
	•		increased property, plant and equipment by $0.6 million, and
	•		decreased other long-term assets by $19.2 million,

•

decreased total liabilities by $29.5 million, including;

	•		decreased accounts payable and accrued expenses by $2.6 million,
	•		decreased current and long-term deferred revenue by $26.9 million, and

•

decreased total stockholders’ equity by $37.8 million as of December 31, 2010.

     The accounting errors and their impact to the unaudited condensed consolidated financial statements are more fully described in Note 2, “Restatement,” of the notes to unaudited condensed consolidated financial statements included in Item 1 of the amended Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2010.

     The Company recorded $155.3 million of charges in the fourth quarter of the fiscal year ended March 31, 2011. The details of the charges and their impact on the consolidated financial statements are described in Note 14, “Subsequent Events,” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

     In connection with the errors identified by the Company resulting in the restatement of the unaudited condensed consolidated financial statements, the Company identified control deficiencies in its internal control over financial reporting that constitute material weaknesses. The Company determined that its disclosure controls and procedures were ineffective as of September 30, 2010, December 31, 2010, March 31, 2011, and June 30, 2011. For a discussion of management’s consideration of the Company’s disclosure controls and procedures and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures,” of this Form 10-Q/A.

     This Form 10-Q/A sets forth the Original Form 10-Q in its entirety, as modified and superseded where necessary to reflect the restatement. The following items have been amended as a result of, and to reflect, the restatement:

	•		Part I — Item 1. Financial Statements;
	•		Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations;
	•		Part I — Item 4. Controls and Procedures;
	•		Part II — Item 1. Legal Proceedings; and
	•		Part II — Item 1A. Risk Factors.

     This Form 10-Q/A continues to reflect circumstances as of the date of the Original Form 10-Q for the quarter ended September 30, 2010 and we have not updated the disclosures contained herein to reflect events that occurred at a later date, except for items related to the restatement or where otherwise indicated.

AMERICAN SUPERCONDUCTOR CORPORATION

INDEX

				Page No.
PART I—FINANCIAL INFORMATION
Item 1.		Financial Statements			6
		Unaudited Condensed Consolidated Balance Sheets as of September 30, 2010 (restated) and March 31, 2010			6
		Unaudited Condensed Consolidated Statements of Income for the three and six months ended September 30, 2010 (restated) and 2009			7
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended September 30, 2010 (restated) and 2009			8
		Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2010 (restated) and 2009			9
		Notes to Unaudited Condensed Consolidated Financial Statements			10
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			42
Item 4.		Controls and Procedures			44
PART II—OTHER INFORMATION
Item 1.		Legal Proceedings			46
Item 1A.		Risk Factors			48
Item 6.		Exhibits			61
Signature					62
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

AMERICAN SUPERCONDUCTOR CORPORATION

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

		September 30,				March 31,
		2010				2010
		(Restated)
ASSETS
Current assets:
Cash and cash equivalents		$	52,615			$	87,594
Marketable securities			69,218				54,469
Accounts receivable, net			92,556				62,203
Inventory			46,058				35,858
Prepaid expenses and other current assets			21,136				15,381
Restricted cash			5,484				5,713
Deferred tax assets			3,839				1,776
Total current assets			290,906				262,994
Property, plant and equipment, net			79,970				64,315
Goodwill			47,508				36,696
Intangibles, net			7,966				7,770
Marketable securities			3,900				7,342
Deferred tax assets			4,121				3,043
Other assets			30,506				18,024
Total assets		$	464,877			$	400,184
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	95,994			$	84,319
Deferred revenue			25,113				19,970
Deferred tax liabilities			1,580				471
Total current liabilities			122,687				104,760
Deferred revenue			16,433				13,302
Deferred tax liabilities			1,929				777
Other			418				380
Total liabilities			141,467				119,219
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock			456				448
Additional paid-in capital			718,411				698,417
Accumulated other comprehensive loss			(1,576	)			(7,011	)
Accumulated deficit			(393,881	)			(410,889	)
Total stockholders’ equity			323,410				280,965
Total liabilities and stockholders’ equity		$	464,877			$	400,184

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

		Three months ended								Six months ended
		September 30,								September 30,
		2010				2009				2010				2009
		(Restated)								(Restated)
Revenues		$	98,073			$	74,672			$	195,283			$	147,672
Cost and operating expenses:
Cost of revenues			59,416				45,637				117,640				96,054
Research and development			7,857				5,416				15,192				9,944
Selling, general and administrative			17,346				12,712				32,529				23,597
Amortization of acquisition related intangibles			374				460				762				905
Restructuring and impairments			—				117				—				451
Total cost and operating expenses			84,993				64,342				166,123				130,951
Operating income			13,080				10,330				29,160				16,721
Interest income, net			191				190				367				433
Other income (expense), net			2,448				(871	)			2,618				(2,847	)
Income before income tax expense			15,719				9,649				32,145				14,307
Income tax expense			7,880				5,309				15,137				8,175
Net income		$	7,839			$	4,340			$	17,008			$	6,132
Net income per common share
Basic		$	0.17			$	0.10			$	0.37			$	0.14
Diluted		$	0.17			$	0.10			$	0.37			$	0.14
Weighted average number of common shares outstanding
Basic			45,482				44,247				45,363				44,020
Diluted			46,217				45,233				46,099				44,922

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

		Three months ended								Six months ended
		September 30,								September 30,
		2010				2009				2010				2009
		(Restated)								(Restated)
Net income		$	7,839			$	4,340			$	17,008			$	6,132
Other comprehensive income, net of tax:
Foreign currency translation gains			16,506				3,248				4,171				7,305
Unrealized gains on cash flow hedges			1,463				—				1,319				—
Unrealized losses on investments			(33	)			(19	)			(55	)			(110	)
Total other comprehensive income, net of tax			17,936				3,229				5,435				7,195
Comprehensive income		$	25,775			$	7,569			$	22,443			$	13,327

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

AMERICAN SUPERCONDUCTOR CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Six months ended
		September 30,
		2010				2009
		(Restated)
Cash flows from operating activities:
Net income		$	17,008			$	6,132
Adjustments to reconcile net income to net cash (used in) provided by operations:
Depreciation and amortization			5,428				4,704
Stock-based compensation expense			7,825				6,918
Stock-based compensation expense—non-employee			181				30
Provision for excess and obsolete inventory			580				—
Allowance for doubtful accounts			(4	)			52
Write-off of prepaid value added taxes			431				—
Deferred income taxes			(793	)			(1,111	)
Other non-cash items			1,107				382
Changes in operating asset and liability accounts:
Accounts receivable			(32,504	)			3,010
Inventory			(10,348	)			6,235
Prepaid expenses and other current assets			(6,620	)			712
Accounts payable and accrued expenses			8,011				(4,810	)
Deferred revenue			7,820				(567	)
Net cash (used in) provided by operating activities			(1,878	)			21,687
Cash flows from investing activities:
Purchase of property, plant and equipment			(17,950	)			(2,741	)
Purchase of marketable securities			(25,283	)			(40,533	)
Proceeds from the maturity of marketable securities			15,482				33,374
Change in restricted cash			253				(546	)
Purchase of intangible assets			(1,615	)			(843	)
Purchase of minority investment			(8,000	)			—
Change in other assets			(182	)			(617	)
Net cash used in investing activities			(37,295	)			(11,906	)
Cash flows from financing activities:
Proceeds from exercise of employee stock options and ESPP			1,574				4,068
Net cash provided by financing activities			1,574				4,068
Effect of exchange rate changes on cash and cash equivalents			2,620				2,229
Net (decrease) increase in cash and cash equivalents			(34,979	)			16,078
Cash and cash equivalents at beginning of period			87,594				70,674
Cash and cash equivalents at end of period		$	52,615			$	86,752
Supplemental schedule of cash flow information:
Non-cash contingent consideration in connection with acquisitions		$	10,003			$	10,828
Cash paid for income taxes			6,925				2,531
Non-cash issuance of common stock			419				320

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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 is a leading provider of megawatt-scale solutions that lower the cost of wind power and enhance the performance of the power grid. In the wind power market, the Company enables manufacturers to field wind turbines through its advanced engineering, support services and power electronics products. In the power grid market, the Company enables electric utilities and renewable energy project developers to connect, transmit and distribute power through its transmission planning services and power electronics and superconductor based products. The Company’s wind and power grid products and services provide exceptional reliability, security, efficiency and affordability to its customers. The Company operates in two business units: 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 Commission’s (“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 (“GAAP”) 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 GAAP. 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 September 30, 2010 and 2009 and the financial position at September 30, 2010. 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. Certain reclassifications of prior year amounts have been made to conform to current year presentation. These reclassifications had no effect on net income, cash flows or stockholders’ equity.

     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, 2010 (fiscal 2009) which are contained in the Company’s Annual Report on Form 10-K, filed with the SEC on May 27, 2010.

     Recent Accounting Pronouncements

     In October 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable Revenue Arrangements, pertaining to the accounting for revenue arrangements with multiple deliverables. Specifically, the new standard requires an entity to allocate consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. In the absence of the vendor-specific objective evidence or third-party evidence of the selling prices, consideration must be allocated to the deliverables based on management’s best estimate of the selling prices. In addition, the new standard eliminates the use of the residual method of allocation. The new accounting standard supersedes the prior multiple element revenue arrangement accounting rules that were previously used by the Company. The Company adopted this new accounting standard on April 1, 2010 using the prospective method and the adoption did not have a material impact on its consolidated financial statements.

     In January 2010, the Company adopted Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This standard amends the disclosure guidance with respect to fair value measurements for both interim and annual reporting periods. Specifically, this standard requires new disclosures for significant transfers of assets or liabilities between Level 1 and Level 2 in the fair value hierarchy; separate disclosures for purchases, sales, issuance and settlements of Level 3 fair value items on a gross, rather than net basis; and more robust disclosure of the valuation techniques and inputs used to measure Level 2 and Level 3 assets and liabilities. The Company has included these new disclosures, as applicable, in Note 3, “Marketable Securities and Fair Value Disclosures,” of the consolidated financial statements.

     In December 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-29, Business Combinations (Topic 805), Disclosure of Supplementary Pro forma Information for Business Combinations a consensus of the FASB Emerging Issues Task Force (ASC 2010-29). This amendment clarifies the periods for which pro forma financial information is presented. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business

combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. ASU 2010-29 is effective prospectively for business combinations that occur on or after the beginning of the first annual reporting period beginning after December 15, 2010. The Company does not expect the adoption of ASU 2011-04 to have a material impact on the Company’s consolidated results of operations, financial condition, or cash flows.

     In June 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU 2011-05 requires entities to present net income and other comprehensive income in either a single continuous statement or in two separate, but consecutive, statements of net income and other comprehensive income. ASU 2011-05 is effective for fiscal years and interim periods beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-04 to have a material impact on the Company’s consolidated results of operations, financial condition, or cash flows.

2. Restatement

     On March 31, 2011, Sinovel Wind Co. Ltd., (“Sinovel”), a manufacturer of wind energy systems in China and the Company’s largest customer, refused to accept scheduled shipments from the Company. This action, combined with aging receivables from Sinovel and certain of its other customers in China, prompted the Company to re-evaluate its previous accounting judgments around revenue recognition and accounts receivable and the effectiveness of its internal control over financial reporting. This re-evaluation included an internal review of documents and interviews with management and other personnel with the assistance of external counsel. As a result, the Company determined that revenues and accounts receivable were incorrectly recorded in the quarterly period ended September 30, 2010 for certain of its customers in China, not including Sinovel, as the fee for shipments of products to these customers was not fixed or determinable or collectability was not reasonably assured at the time of shipment. Further, as a result of aging receivables and other negative events surrounding the customer relationship, the Company concluded that revenue related to shipments to Sinovel in the quarterly period ended December 31, 2010 was incorrectly recorded since collectability was not reasonably assured at the time of shipment. For Sinovel and certain other customers in China, the Company has restated revenues based on a cash basis of accounting with cash applied first against accounts receivable balances, as in the case of Sinovel as of September 30, 2010, then costs of shipments (inventory and value added taxes) before recognizing any gross margin. The Company had previously recognized revenues in the quarters ended September 30, 2010 and December 31, 2010 based on the receipt of shipments by these customers but prior to the Company’s receipt of payment for such shipments.

     Accordingly, the Company’s unaudited condensed consolidated financial statements for the three and six months ended September 30, 2010 have been restated to reflect restatement adjustments to record revenues on a cash basis for these certain customers in China as well as the related effects to accounts receivable, inventory, deferred taxes, stockholders’ equity, cost of revenues, income taxes and other accounts on the unaudited condensed consolidated financial statements. Included in the restatement adjustments for the three months ended September 30, 2010, is an increase in the provision for excess and obsolete inventory of $0.6 million and a write-off of certain prepaid value added taxes of $0.2 million that relate to amounts due from certain of its customers in China which the Company determined were not recoverable as of September 30, 2010. In addition, the Company recorded an adjustment of $1.8 million to increase property, plant and equipment and accrued expenses related to the implementation of the Company’s new enterprise resource planning system. The restatement adjustments decreased the Company’s revenues by $3.5 million, decreased net income by $2.1 million and decreased basic and diluted net income per share by $0.05 for the three and six months ended September 30, 2010. The restatement adjustments decreased the Company’s total assets by $0.4 million, increased total liabilities by $1.8 million, and decreased total stockholders’ equity by $2.2 million as of September 30, 2010.

     The effects of the restatement on the Company’s unaudited condensed consolidated balance sheet as of September 30, 2010 are as follows (in thousands):

		September 30, 2010
		Previously
		reported				Adjustments				Restated
Accounts receivable		$	96,042			$	(3,486	)		$	92,556
Inventory			45,241				817				46,058
Prepaid expenses and other current assets			21,357				(221	)			21,136
Deferred tax assets			3,117				722				3,839
Total current assets			293,074				(2,168	)			290,906
Property, plant and equipment, net			78,160				1,810				79,970
Total assets			465,235				(358	)			464,877
Accounts payable and accrued expenses			94,184				1,810				95,994
Total current liabilities			120,877				1,810				122,687
Total liabilities			139,657				1,810				141,467
Accumulated other comprehensive loss			(1,557	)			(19	)			(1,576	)
Accumulated deficit			(391,732	)			(2,149	)			(393,881	)
Total stockholders’ equity			325,578				(2,168	)			323,410
Total liabilities and stockholders’ equity		$	465,235			$	(358	)		$	464,877

     The effects of the restatement on the Company’s unaudited condensed consolidated statements of income for the three and six months ended September 30, 2010 are as follows (in thousands, except share data):

		Three months ended
		September 30, 2010
		Previously
		reported				Adjustments				Restated
Revenues		$	101,529			$	(3,456	)		$	98,073
Cost of revenues			60,226				(810	)			59,416
Selling, general and administrative			17,127				219				17,346
Total cost and operating expenses			85,584				(591	)			84,993
Operating income			15,945				(2,865	)			13,080
Income before income tax expense			18,584				(2,865	)			15,719
Income tax expense			8,596				(716	)			7,880
Net income		$	9,988			$	(2,149	)		$	7,839
Net income per common share — basic		$	0.22			$	(0.05	)		$	0.17
Net income per common share — diluted		$	0.22			$	(0.05	)		$	0.17

		Six months ended
		September 30, 2010
		Previously
		reported				Adjustments				Restated
Revenues		$	198,739			$	(3,456	)		$	195,283
Cost of revenues			118,450				(810	)			117,640
Selling, general and administrative			32,310				219				32,529
Total cost and operating expenses			166,714				(591	)			166,123
Operating income			32,025				(2,865	)			29,160
Income before income tax expense			35,010				(2,865	)			32,145
Income tax expense			15,853				(716	)			15,137
Net income		$	19,157			$	(2,149	)		$	17,008
Net income per common share — basic		$	0.42			$	(0.05	)		$	0.37
Net income per common share — diluted		$	0.42			$	(0.05	)		$	0.37

     The effects of the restatement on the Company’s unaudited condensed consolidated statements of comprehensive income for the three and six months ended September 30, 2010 are as follows (in thousands):

		Three months ended
		September 30, 2010
		Previously
		reported				Adjustments				Restated
Net income		$	9,988			$	(2,149	)		$	7,839
Foreign currency translation			16,525				(19	)			16,506
Total other comprehensive income, net of tax			17,955				(19	)			17,936
Comprehensive income		$	27,943			$	(2,168	)		$	25,775

		Six months ended
		September 30, 2010
		Previously
		reported				Adjustments				Restated
Net income		$	19,157			$	(2,149	)		$	17,008
Foreign currency translation			4,190				(19	)			4,171
Total other comprehensive income, net of tax			5,454				(19	)			5,435
Comprehensive income		$	24,611			$	(2,168	)		$	22,443

     The effects of the restatement on the Company’s unaudited condensed consolidated statement of cash flows for the six months ended September 30, 2010 are as follows (in thousands):

		Six months ended
		September 30, 2010
		Previously
		reported				Adjustments				Restated
Cash flows from operating activities:
Net income		$	19,157			$	(2,149	)		$	17,008
Provision for excess and obsolete inventory			—				580				580
Allowance for doubtful accounts			959				(963	)			(4	)
Write-off of prepaid value added taxes			210				221				431
Deferred income taxes			(71	)			(722	)			(793	)
Accounts receivable			(36,953	)			4,449				(32,504	)
Inventory			(8,934	)			(1,414	)			(10,348	)
Prepaid expenses and other current assets			(6,618	)			(2	)			(6,620	)
Net cash (used in) provided by operating activities		$	(1,878	)		$	—			$	(1,878	)

     As a result of these errors, the Company identified certain deficiencies in its internal control over financial reporting that constitute material weaknesses. The Company determined that its disclosure controls and procedures were not effective as of September 30, 2010. For a discussion of management’s consideration of the Company’s disclosure controls and procedures and the material weaknesses identified, see Part I, Item 4, “Controls and Procedures,” of this amended Quarterly Report on Form 10-Q.

     Concurrent with the filing of this Form 10-Q/A, the Company will file an amended Form 10-Q to reflect the effects of these accounting errors on the unaudited condensed consolidated financial statements as of and for the three and nine months ended December 31, 2010. The restatement adjustments decreased the Company’s revenues by $82.6 million and $86.1 million, decreased net income by $34.2 million and $36.3 million, decreased basic net income per share by $0.71 and $0.78 and decreased diluted net income per share by $0.71 and $0.78 for the three and nine months ended December 31, 2010, respectively. The restatement adjustments decreased the Company’s total assets by $67.3 million, decreased total liabilities by $29.5 million, and decreased total stockholders’ equity by $37.8 million as of December 31, 2010.

3. 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 six months ended September 30, 2010 and 2009 (in thousands):

		Three months ended								Six months ended
		September 30,								September 30,
		2010				2009				2010				2009
Cost of revenues		$	452			$	354			$	835			$	579
Research and development			691				523				1,159				990
Selling, general and administrative			3,183				2,975				5,831				5,349
Total		$	4,326			$	3,852			$	7,825			$	6,918

     During the six months ended September 30, 2010, the Company granted approximately 219,000 and 324,000 shares of stock options and restricted stock, respectively, to employees under the 2007 Stock Incentive Plan. The restricted stock awards include approximately 86,000 shares of performance-based restricted stock, which will vest upon achievement of certain annual financial and operational performance measurements. The remaining shares granted vest upon the passage of time, generally 3 years. For awards that vest upon the passage of time, expense is being recorded on a straight-line basis over the vesting period. At September 30, 2010, the Company determined that achievement of the performance measures is probable and as such, is recognizing the fair value of the performance-based 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 $22.6 million at September 30, 2010. This expense will be recognized over a weighted-average expense period of 2.2 years.

     The weighted-average assumptions used in the Black-Scholes valuation model for stock options granted during the three and six months ended September 30, 2010 and 2009 are as follows:

		Three months ended								Six months ended
		September 30,								September 30,
		2010				2009				2010				2009
Expected volatility			61.5	%			66.5	%			65.6	%			70.2	%
Risk-free interest rate			1.6	%			2.4	%			2.1	%			2.6	%
Expected life (years)			6.2				4.8				6.2				4.8
Dividend yield		None				None				None				None

     The expected volatility was estimated based on an equal weighting of the historical volatility of the Company’s common stock and the implied volatility of the Company’s traded options. The expected life was estimated based on an analysis of the Company’s historical experience of exercise, cancellation, and expiration patterns. The risk-free interest rate is based on the average of the five and seven year U.S. Treasury rates for the three and six months ended September 30, 2010 and the five year U.S. Treasury rates for the three and six months ended September 30, 2009. The stock-based compensation expense recognized in the unaudited condensed consolidated statements of income 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 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.

4. Computation of Net Income per Common Share

     Basic earnings per share (“EPS”) is computed by dividing net earnings by the weighted-average number of common shares outstanding for the period. Diluted EPS is computed by dividing the net earnings 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 six months ended September 30, 2010 and 2009, common equivalent shares of 1.3 million shares and 1.4 million shares, respectively, and 0.9 million shares and 0.8 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 six months ended September 30, 2010 and 2009 (in thousands, except per share data):

		Three months ended								Six months ended
		September 30,								September 30,
		2010				2009				2010				2009
		(Restated)								(Restated)
Numerator:
Net income		$	7,839			$	4,340			$	17,008			$	6,132
Denominator:
Weighted-average shares of common stock outstanding			45,694				44,299				45,597				44,080
Weighted-average shares subject to repurchase			(212	)			(52	)			(234	)			(60	)
Shares used in per-share calculation — basic			45,482				44,247				45,363				44,020
Dilutive effect of employee equity incentive plans			735				986				736				902
Shares used in per-share calculation — diluted			46,217				45,233				46,099				44,922
Net income per share — basic		$	0.17			$	0.10			$	0.37			$	0.14
Net income per share — diluted		$	0.17			$	0.10			$	0.37			$	0.14

5. Fair Value Measurements

     The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosure 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 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 Company’s 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 asset’s or liability’s 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 September 30, 2010 and March 31, 2010 (in thousands):

		Total				Quoted Prices in				Using Significant Other				Using Significant
		Carrying				Active Markets				Observable Inputs				Unobservable Inputs
		Value				(Level 1)				(Level 2)				(Level 3)
September 30, 2010:
Cash equivalents		$	7,524			$	7,524			$	—			$	—
Derivatives			2,450				—				2,450				—
Short-term marketable securities			69,219				—				69,219				—
Long-term marketable securities			3,900				—				3,900				—

		Total				Quoted Prices in				Using Significant Other				Using Significant
		Carrying				Active Markets				Observable Inputs				Unobservable Inputs
		Value				(Level 1)				(Level 2)				(Level 3)
March 31, 2010:
Cash equivalents		$	29,054			$	29,054			$	—			$	—
Derivatives			168				—				168				—
Short-term marketable securities			54,469				—				54,469				—
Long-term marketable securities			7,342				—				7,342				—

Valuation Techniques

Cash Equivalents

     Cash equivalents consist of highly liquid instruments with maturities of three months or less that are regarded as high quality, low risk investments and are measured using such inputs as quoted prices, and are classified within Level 1 of the valuation hierarchy. Cash equivalents consist principally of certificate of deposits and money market accounts.

Marketable Securities

     Long-term and short-term marketable securities consist primarily of government-backed securities and sovereign debt 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. Short-term marketable securities have maturities of greater than three months from original purchase date but less than twelve months from the date of the balance sheet. All marketable securities are considered available-for-sale and are carried at fair value. The Company periodically reviews the realizability of each short-term and long-term marketable security when impairment indicators exist with respect to the security. If an other-than-temporary impairment of value of the security exists, the carrying value of the security is written down to its estimated fair value.

6. Derivative Financial Instruments

     The Company’s 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 Company’s foreign currency hedging program uses both forward contracts and currency options to manage the foreign currency exposures that exist as part of its ongoing business operations.

Cash Flow Hedges

     The Company hedges a portion of its intercompany sales of inventory over a maximum period of 15 months using forward foreign exchange contracts accounted for as cash flow hedges to mitigate the impact of volatility associated with foreign currency transactions.

     For forward foreign exchange contracts that are designated as cash flow hedges, if they are effective in offsetting the variability of the hedged cash flows, and otherwise meet the hedge accounting criteria, changes in the derivatives value are not included in current earnings but are included in other comprehensive income in stockholders’ equity. The changes in fair value will subsequently be reclassified into earnings as a component of cost of revenues, as applicable, when the forecasted transaction occurs. To the extent that a previously forecasted transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded in earnings in the period it occurs. The Company does not enter into

derivative instruments for trading or speculative purposes. Realized gains and losses resulting from these cash flow hedges offset the foreign exchange gains and losses on the underlying transactions being hedged. Gains and losses on derivatives not designated for hedge accounting or representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in other income (expense), net.

     At September 30, 2010, the Company had forward contracts outstanding to hedge cash flow exposure at the Company’s wholly-owned Austrian subsidiary, AMSC Windtec GmbH (“AMSC Windtec”), with aggregate USD equivalent notional amounts of $34.4 million. These contracts expired at various dates through June 2011. The net gain or loss from these cash flow hedges reported in accumulated other comprehensive income will be reclassified to earnings and recorded in cost of revenues in our unaudited condensed consolidated statement of income when the related inventory is sold to third-party customers.

Balance Sheet Hedges

     In addition to cash flow hedges, the Company also enters into foreign currency forward exchange contracts to mitigate the impact of foreign exchange risk related to non-functional currency receivable balances in its foreign entities. The Company does not elect hedge accounting treatment for these hedges, consequently, changes in the fair value of these contracts are recorded within other income (expense), net, in the period which they occur. At September 30, 2010, the Company had forward contracts outstanding with aggregate USD equivalent notional amounts of $58.9 million, which expired in October 2010.

     The fair value amounts of asset derivatives included in prepaid expenses and other current assets and liability derivatives included in accounts payable and accrued expenses in our unaudited condensed consolidated balance sheets related to forward foreign exchange contracts as of September 30, 2010 and March 31, 2010 were as follows (in thousands):

		Asset derivatives								Liability derivatives
		September 30,				March				September 30,				March
		2010				31, 2010				2010				31, 2010
Derivatives designated as cash flow hedges		$	1,561			$	—			$	—			$	—
Derivatives not designated as cash flow hedges			889				168				—				—
Total		$	2,450			$	168			$	—			$	—

The Company recognized the following pre-tax gains related to forward foreign exchange contracts designated as cash flow hedges (in thousands):

		Three months ended								Six months ended
		September				September 30,				September				September 30,
		30, 2010				2009				30, 2010				2009
Gains recognized in other comprehensive income		$	1,950			$	—			$	1,758			$	—

The Company recognized the following pre-tax gains related to forward foreign exchange contracts not designated as cash flow hedges (in thousands):

		Three months ended								Six months ended
		September				September 30,				September				September 30,
		30, 2010				2009				30, 2010				2009
Gains recognized in other expense, net		$	7,994			$	403			$	3,975			$	139
Gains recognized in cost of revenues			440			$	—				440			$	—
Total		$	8,434			$	403			$	4,415			$	139

7. Accounts Receivable

     Accounts receivable consisted of the following (in thousands):

		September 30,
		2010				March 31,
		(Restated)				2010
Accounts receivable (billed)		$	88,243			$	52,664
Accounts receivable (unbilled)			4,957				10,305
Less: Allowance for doubtful accounts			(644	)			(766	)
Accounts receivable, net		$	92,556			$	62,203

     As described in Note 2, “Restatement,” the Company’s unaudited condensed consolidated financial statements for the three and six months ended September 30, 2010 have been restated to reflect adjustments to record revenues on a cash basis of accounting for certain of its customers in China and the related effects to accounts receivable. The restatement adjustments decreased accounts receivable as of September 30, 2010 by $3.5 million.

     The Company also recorded net long-term accounts receivable of $17.8 million and $14.1 million as of September 30, 2010 and March 31, 2010, respectively, which are also classified within other assets and long-term deferred revenue on the unaudited condensed consolidated balance sheet.

 

8. Inventory

     The components of inventory are as follows (in thousands):

		September 30,
		2010				March 31,
		(Restated)				2010
Raw materials		$	20,919			$	18,065
Work-in-process			5,027				7,318
Finished goods			15,704				7,879
Deferred program costs			4,408				2,596
Net inventory		$	46,058			$	35,858

     As described in Note 2, “Restatement,” the Company’s unaudited condensed consolidated financial statements for the three and six months ended September 30, 2010 have been restated to reflect adjustments to record revenues on a cash basis for certain of its customers and the related effects to inventory.

     Deferred program costs as of September 30, 2010 and March 31, 2010 primarily represent costs incurred on wind turbine development programs accounted for under contract accounting where the Company needs to achieve certain milestones or complete development programs before revenue and costs will be recognized.

9. 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								Six months ended
		September 30,								September 30,
		2010				2009				2010				2009
Balance at beginning of period		$	6,375			$	5,325			$	6,431			$	4,749
Accruals for warranties during the period			2,020				1,602				4,332				2,717
Settlements and adjustments during the period			(1,021	)			(1,430	)			(3,389	)			(1,969	)
Balance at end of period		$	7,374			$	5,497			$	7,374			$	5,497

10. Income Taxes

     The Company recorded income tax expense of $7.9 million and $15.1 million for the three and six months ended September 30, 2010, respectively, and $5.3 million and $8.2 million for the three and six months ended September 30, 2009, respectively. The fluctuations relate 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 U.S. 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. Commitments and Contingencies

     The Company enters into long-term construction contracts with customers that require the Company to obtain performance bonds. The Company is required to deposit an amount equivalent to some or all 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.

     As of September 30, 2010, the Company had five performance bonds on behalf of its AMSC Windtec and its wholly-owned subsidiary, Suzhou AMSC Superconductor Co. Ltd (“AMSC China”), in support of customer contracts to guarantee supply of core components and software. The total value of the outstanding performance bonds is $2.0 million expiring between December 31, 2010 and March 31, 2014. 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.

     At September 30, 2010 and March 31, 2010, the Company had $5.5 million and $5.7 million, respectively, of restricted cash included in current assets, which includes the restricted cash securing letters of credit for various supply contracts. The Company also has an additional $3.5 million in bank guarantees and letters of credit supported by unsecured lines of credit.

     The Company also has unused, unsecured lines of credit consisting of RMB 11.9 million (approximately $1.8 million) and €2.3 million (approximately $3.1 million) as of September 30, 2010. In July 2011, the Bank of China informed the Company that its unsecured credit line of approximately RMB 100.0 million (approximately $15.0 million), which expired in August 2011, would not be renewed.

     From time to time, the Company is involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

     Between April 6, 2011 and April 29, 2011, six putative securities class action complaints were filed against the Company and two of its officers in the United States District Court for the District of Massachusetts. On May 12, 2011, an additional complaint was filed against the Company, its officers and directors, and the underwriters who participated in the Company’s November 12, 2010 securities offering. On June 7, 2011, the United States District Court for the District of Massachusetts consolidated these actions under the caption Lenartz v. American Superconductor Corporation, et al. Docket No. 1:11-cv-10582-WGY. On June 16, 2011, the court appointed the law firm Robbins Geller Rudman & Dowd LLP as Lead Counsel and the Plumbers and Pipefitters National Pension Fund as Lead Plaintiff. On August 31, 2011, the Lead Plaintiff filed a consolidated amended complaint against the Company, its officers and directors, and the underwriters who participated in the Company’s November 12, 2010 securities offering, asserting claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as well as under sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The complaint alleges that during the relevant class period, the Company and its officers omitted to state material facts and made materially false and misleading statements relating to, among other things, the Company’s projected and recognized revenues and earnings, as well as the Company’s relationship with Sinovel Wind Group Co., Ltd. that artificially inflated the value of the Company’s stock price. The complaint further alleges that the Company’s November 12, 2010 securities offering contained untrue statements of material facts and omitted to state material facts required to be stated therein. The plaintiffs seek unspecified damages, rescindment of the Company’s November 12, 2010 securities offering, and an award of costs and expenses, including attorney’s fees.

     On April 27, 2011, a putative shareholder derivative complaint was filed against the Company (as a nominal defendant) and each of its current directors in Superior Court for the Commonwealth of Massachusetts, Worcester County. The case is captioned Segel v. Yurek, et al., Docket No. 11-0787. Between May 4, 2011 and June 17, 2011, four additional putative shareholder derivative complaints were filed in the United States District Court for the District of Massachusetts against the Company and certain of its directors and officers. The cases are captioned Weakley v. Yurek, et al., Docket No. 1:11-cv-10784; Marlborough Family Revocable Trust v. Yurek, et al., Docket No. 1:11-cv-10825; Connors v. Yurek, et al., Docket

No. 1:11-cv-10910; and Hurd v. Yurek, et al., Docket No. 1:11-cv-11102. On June 1, 2011, the plaintiff in Marlborough Family Revocable Trust v. Yurek, et al. moved to voluntarily dismiss its complaint and refiled its complaint in Superior Court for the Commonwealth of Massachusetts, Middlesex County, on June 3, 2011. The case is now captioned Marlborough Family Revocable Trust v. Yurek, et al., Docket No. 11-1961. The Superior Court in Worcester County granted the plaintiff’s motion to transfer in Segel v. Yurek et al. to the Superior Court for the Commonwealth of Massachusetts, Middlesex County on June 23, 2011, and that matter is now captioned Segel v. Yurek et al., Docket No. 11-2269. On July 5, 2011, the Weakley, Connors and Hurd actions were consolidated in United States District Court for the District of Massachusetts. That matter is now captioned In re American Superconductor Corporation Derivative Litigation, Docket No. 1:11-cv-10784. On June 1, 2011, the plaintiff in Marlborough Family Revocable Trust v. Yurek, et al. moved to voluntarily dismiss its complaint and, on June 3, 2011, refiled its complaint in Superior Court for the Commonwealth of Massachusetts, Middlesex County. The Superior Court in Worcester County granted the plaintiff’s motion to transfer in Segel v. Yurek et al. to the Superior Court for the Commonwealth of Massachusetts, Middlesex County on June 23, 2011. On September 7, 2011, the Marlborough and Segel actions were consolidated in Superior Court for the Commonwealth of Massachusetts, Middlesex County. The case is now captioned Marlborough Family Revocable Trust v. Yurek, et al., Docket No. 11-1961. The allegations of the derivative complaints mirror the allegations made in the putative class action complaints described above. The plaintiffs purport to assert claims against the director defendants for breach of fiduciary duty, abuse of control, gross mismanagement and corporate waste. The plaintiffs seek unspecified damages on behalf of the Company, as well as an award of costs and expenses, including attorney’s fees.

     If a matter is both probable to result in liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss. With respect to the above referenced litigation matters, such an estimate cannot be made. There are numerous factors that make it difficult to meaningfully estimate possible loss or range of loss at this stage of these litigation matters, including that: the proceedings are in relatively early stages, there are significant factual and legal issues to be resolved, information obtained or rulings made during the lawsuits could affect the methodology for calculation of rescission and the related statutory interest rate. In addition, with respect to claims where damages are the requested relief, no amount of loss or damages has been specified. Therefore, the Company is unable at this time to estimate possible losses. The Company believes that these litigations are without merit, and it intends to defend these actions vigorously.

     On September 13, 2011, the Company commenced a series of legal actions in China against Sinovel Wind Group Co. Ltd. (“Sinovel”). The Company’s Chinese subsidiary, Suzhou AMSC Superconductor Co. Ltd. (“AMSC China”), filed a claim for arbitration with the Beijing Arbitration Commission in accordance with the terms of the Company’s supply contracts with Sinovel. On March 31, 2011, Sinovel refused to accept contracted shipments of 1.5 megawatt (MW) and 3 MW wind turbine core electrical components and spare parts that the Company was prepared to deliver. The Company alleges that these actions constitute material breaches of its contracts because Sinovel did not give the Company notice that it intended to delay deliveries as required under the contracts. Moreover, the Company alleges that Sinovel has refused to pay past due amounts for prior shipments of core electrical components and spare parts. The Company is seeking compensation for past product shipments (including interest) and monetary damages due to Sinovel’s breaches of its contracts. The Company is also seeking specific performance of our existing contracts as well as reimbursement of all costs and reasonable expenses with respect to the arbitration.

     The Company also submitted a civil action application to the Beijing No. 1 Intermediate People’s Court against Sinovel for software copyright infringement. The application alleges Sinovel’s unauthorized use of portions of the Company’s wind turbine control software source code developed for Sinovel’s 1.5MW wind turbines and the binary code, or upper layer, of the Company’s software for the PM3000 power converters in 1.5MW wind turbines. In July 2011, a former employee of the Company’s AMSC Windtec GmbH subsidiary was arrested in Austria and is currently awaiting trial on charges of economic espionage and fraudulent manipulation of data. As a result of the Company’s internal investigation and a criminal investigation conducted by Austrian authorities, the Company believes that this former employee was contracted by Sinovel through an intermediary while employed by the Company and improperly obtained and transferred to Sinovel portions of its wind turbine control software source code developed for Sinovel’s 1.5MW wind turbines. Moreover, the Company believes that the former employee illegally used source code to develop for Sinovel a software modification to circumvent the encryption and remove technical protection measures on the PM3000 power converters in 1.5MW wind turbines in the field. The Company is seeking a cease and desist order with respect to the unauthorized copying, installation and use of its software, monetary damages for our economic losses and reimbursement of all costs and reasonable expenses. The court must accept the application in order for the case to proceed, and there can be no assurance that the court will do so.

     The Company submitted a civil action application to the Beijing Higher People’s Court against Sinovel and certain of its employees for trade secret infringement. The application alleges the defendants’ unauthorized use of portions of the Company’s wind turbine control software source code developed for Sinovel’s 1.5MW wind turbines as described above with respect to the Copyright Action. The Company is seeking monetary damages for the trade secret infringement as well as reimbursement of all costs and reasonable expenses. The court must accept the application in order for the case to proceed, and there can be no assurance that the court will do so.

     On September 16, 2011, the Company filed a civil copyright infringement complaint in the Hainan Province No. 1 Intermediate People’s Court against Dalian Guotong Electric Co. Ltd. (“Guotong”), a supplier of power converter products to Sinovel, and Huaneng Hainan Power, Inc., a wind farm operator that has purchased Sinovel wind turbines containing Goutong power converter products. The application alleges that the Company’s PM1000 converters in certain Sinovel wind turbines have been replaced by converters produced by Guotong. Because the Guotong converters are being used in wind turbines containing its wind turbine control software, the Company believes that its copyrighted software is being infringed. The Company is seeking a cease and desist order with respect to the unauthorized use of its software, monetary damages for its economic losses (with respect to Guotong only) and reimbursement of all costs and reasonable expenses.

12. Acquisitions

Acquisition of Windtec Consulting GmbH

     On January 5, 2007, the Company acquired AMSC Windtec, a corporation incorporated according to the laws of Austria. AMSC Windtec develops and sells electrical systems for wind turbines. AMSC 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 AMSC Windtec’s achievement of specified revenue objectives during the first four fiscal years following closing of the acquisition. During the six months ended September 30, 2010, the Company recorded contingent consideration of $10.0 million to goodwill and additional paid-in capital representing 350,000 shares earned. These 350,000 shares are expected to be issued in the second quarter of the fiscal year ending March 31, 2012. As of September 30, 2010, the Company has recorded contingent consideration up to the maximum amount of shares that could be earned under the agreement. The carrying amount of goodwill at September 30, 2010 and March 31, 2010 was $47.5 million and $36.7 million, respectively. The goodwill activity for the six months ended September 30, 2010 is as follows (in thousands):

Balance at April 1, 2010		$	36,696
Contingent consideration			10,003
Net foreign exchange rate impact			809
Balance at September 30, 2010		$	47,508

Investment in Tres Amigas

     On October 9, 2009, the Company 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 unaudited condensed consolidated balance sheet. The Company’s minority interest in the losses of Tres Amigas is included in other income (expense), net, on the unaudited condensed consolidated statements of income and was immaterial for the three and six months ended September 30, 2010. The carrying value of the investment at September 30, 2010 was $1.4 million.

Investment in Blade Dynamics Ltd.

     On August 12, 2010, the Company acquired (through AMSC Windtec, a wholly-owned subsidiary), a minority equity ownership position in Blade Dynamics Ltd., (“Blade Dynamics”), a designer and manufacturer of advanced wind turbine blades based on proprietary materials and structural technologies, for $8.0 million in cash. The investment was recorded under the equity method of accounting and is included in other assets on the condensed consolidated balance sheet. The Company’s minority interest in net losses of Blade Dynamics is included in other income (expense), net, on the condensed consolidated statements of income. The net investment activity for the six months ended September 30, 2010 is as follows (in thousands):

Purchase of minority investment		$	8,000
Minority interest in net losses			(212	)
Net foreign exchange rate impact			546
Balance at September 30, 2010		$	8,334

13. Business Segment Information

     The Company reports its financial results in two reportable business segments: AMSC Power Systems and AMSC Superconductors.

     AMSC Power Systems produces a broad range of products to increase electrical grid capacity and reliability, supplies electrical systems used in wind turbines, provides power electronic products that interconnect wind farms and solar power plants 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 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.

     As described in Note 2, “Restatement,” the Company’s unaudited condensed consolidated financial statements included in the Original Form 10-Q for the quarterly period ending September 30, 2010 have been restated. Accordingly, the Company has restated operating results for its business segments for the three and six months ended September 30, 2010. The operating results for the two business segments are as follows (in thousands):

		Three months ended								Six months ended
		September 30,								September 30,
		2010								2010
		(Restated)				2009				(Restated)				2009
Revenues:
AMSC Power Systems		$	95,084			$	71,791			$	190,012			$	142,487
AMSC Superconductors			2,989				2,881				5,271				5,185
Total		$	98,073			$	74,672			$	195,283			$	147,672

		Three months ended								Six months ended
		September 30,								September 30,
		2010								2010
		(Restated)				2009				(Restated)				2009
Operating income:
AMSC Power Systems		$	23,977			$	19,866			$	49,462			$	35,261
AMSC Superconductors			(6,533	)			(5,647	)			(12,444	)			(11,144	)
Unallocated corporate expenses			(4,364	)			(3,889	)			(7,858	)			(7,396	)
Total		$	13,080			$	10,330			$	29,160			$	16,721

     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. Unallocated corporate expenses include stock-based compensation expense of $4.3 million and $3.9 million for the three months ended September 30, 2010 and 2009, respectively, and $7.8 million and $6.9 million for the six months ended September 30, 2010 and 2009, respectively. Unallocated corporate expenses for the three and six months ended September 30, 2009 included $0.1 million and $0.5 million, respectively, of restructuring charges related primarily to the closure of the Company’s facility in Westborough, Massachusetts.

     For the three and six months ended September 30, 2010, a substantial portion of the Company’s revenues was recognized from one customer: Sinovel Wind Co., Ltd., a manufacturer of wind turbines based in China. Revenue to Sinovel represented 82% and 77% of total revenues for the three and six months ended September 30, 2010, respectively, compared to 76% and 65% for the three and six months ended September 30, 2009, respectively.

     Total assets for the two business segments are as follows (in thousands):

		September 30,
		2010				March 31,
		(Restated)				2010
AMSC Power Systems		$	254,623			$	179,873
AMSC Superconductors			47,622				32,978
Corporate assets			162,632				187,333
Total		$	464,877			$	400,184

14. Subsequent Events

     The Company has performed an evaluation of subsequent events through the time of filing this Quarterly Report on Form 10-Q/A with the SEC.

Fiscal 2010 Annual Report

     The Company is concurrently filing its Annual Report on Form 10-K for the fiscal year ended March 31, 2011 after the due date for such filing. As a result of the issues identified in Note 2, “Restatement,” and other adverse events that have occurred during and subsequent to the quarterly period ended March 31, 2011, the Company recorded the following material charges in the fourth quarter of the fiscal year ended March 31, 2011:

Impact on loss before income tax expense for the quarterly period ended March 31, 2011:
Increase in provision for excess and obsolete inventory		$	61,216
Loss on purchase commitments			38,763
Goodwill and long-lived asset impairment			49,955
Write-off of prepaid value added taxes			5,355
Total impact on loss before income tax expenses for the quarterly period ended March 31, 2011		$	155,289

     The fourth quarter charges shown above are more fully described in the Form 10-K for the fiscal year ended March 31, 2011.

Quarter Ended December 31, 2010

     The Company is concurrently filing an amended Form 10-Q for the quarterly period ended December 31, 2010 to restate its consolidated financial statements, related notes, key financial data and management’s discussion and analysis related to those periods to correct accounting errors. The adjustments decreased revenues by $82.6 million and $86.1 million, decreased net income by $34.2 million and $36.3 million and decreased basic and diluted net income per share by $0.71 and $0.78 for the three and nine months ended December 31, 2010, respectively. The accounting errors and their impact to the unaudited condensed consolidated financial statements are more fully described in Note 2, “Restatement.”

     Included in the restatement adjustments for the three months ended December 31, 2010, is an increase in the provision for excess and obsolete inventory of $2.1 million and a write-off of certain prepaid value added taxes of $0.1 million that relate to amounts due from certain of its customers in China which the Company determined were not recoverable as of December 31, 2010. In addition, the Company determined that the achievement of certain Company performance measures were not probable to occur as of December 31, 2010 with revenue for certain customers now being recorded on a cash basis. The Company recorded an adjustment to reduce its bonus accrual, recorded in accrued expenses and cost and operating expenses by $1.4 million and stock-based compensation expenses by $1.2 million related to performance-based stock awards. The Company also recorded an adjustment of $0.6 million to increase property, plant and equipment and accrued expenses

related to the implementation of the Company’s new enterprise resource planning system. In addition, the Company identified and corrected minor errors in the unaudited condensed consolidated statement of cash flows for the nine months ended December 31, 2010.

     The effects of the restatement on the Company’s unaudited condensed consolidated balance sheet as of December 31, 2010 are as follows (in thousands):

		December 31, 2010
		Previously
		reported				Adjustments				Restated
Accounts receivable		$	121,376			$	(95,105	)		$	26,271
Inventory			40,841				36,803				77,644
Prepaid expenses and other current assets			36,230				5,823				42,053
Deferred tax assets			3,640				2,654				6,294
Total current assets			450,451				(49,825	)			400,626
Property, plant and equipment, net			89,131				567				89,698
Long-term deferred tax assets			4,471				1,116				5,587
Other assets			30,245				(19,203	)			11,042
Total assets			640,441				(67,345	)			573,096
Accounts payable and accrued expenses			95,806				(2,639	)			93,167
Deferred revenue			21,837				(10,388	)			11,449
Total current liabilities			120,296				(13,027	)			107,269
Long-term deferred revenue			18,299				(16,469	)			1,830
Total liabilities			140,470				(29,496	)			110,974
Additional paid-in capital			883,097				(1,197	)			881,900
Accumulated other comprehensive loss			(7,905	)			(341	)			(8,246	)
Accumulated deficit			(375,728	)			(36,311	)			(412,039	)
Total stockholders’ equity			499,971				(37,849	)			462,122
Total liabilities and stockholders’ equity		$	640,441			$	(67,345	)		$	573,096

     The effects of the restatement on the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended December 31, 2010 are as follows (in thousands, except share data):

		Three months ended
		December 31, 2010
		Previously
		reported				Adjustments				Restated
Revenues		$	114,193			$	(82,623	)		$	31,570
Cost of revenues			67,709				(36,181	)			31,528
Research and development			9,057				(640	)			8,417
Selling, general and administrative			15,564				(1,372	)			14,192
Total cost and operating expenses			92,723				(38,193	)			54,530
Operating (loss) income			21,470				(44,430	)			(22,960	)
(Loss) income before income tax expense			23,779				(44,432	)			(20,653	)
Income tax (benefit) expense			7,775				(10,270	)			(2,495	)
Net (loss) income		$	16,004			$	(34,162	)		$	(18,158	)
Net (loss) earnings per common share — basic		$	0.33			$	(0.71	)		$	(0.38	)
Net (loss) earnings per common share — diluted		$	0.33			$	(0.71	)		$	(0.38	)

		Nine months ended
		December 31, 2010
		Previously
		reported				Adjustments				Restated
Revenues		$	312,932			$	(86,079	)		$	226,853
Cost of revenues			186,160				(36,993	)			149,167
Research and development			24,249				(639	)			23,610
Selling, general and administrative			47,874				(1,150	)			46,724
Total cost and operating expenses			259,437				(38,782	)			220,655
Operating (loss) income			53,495				(47,297	)			6,198
(Loss) income before income tax expense			58,789				(47,297	)			11,492
Income tax (benefit) expense			23,628				(10,986	)			12,642
Net (loss) income		$	35,161			$	(36,311	)		$	(1,150	)
Net (loss) earnings per common share — basic		$	0.76			$	(0.78	)		$	(0.02	)
Net (loss) earnings per common share — diluted		$	0.76			$	(0.78	)		$	(0.02	)

     The effects of the restatement on the Company’s unaudited condensed consolidated statements of comprehensive (loss) income for the three and nine months ended December 31, 2010 are as follows (in thousands, except share data):

		Three months ended
		December 31, 2010
		Previously
		reported				Adjustments				Restated
Net (loss) income		$	16,004			$	(34,162	)		$	(18,158	)
Foreign currency translation			(5,063	)			(323	)			(5,386	)
Total other comprehensive income, net of tax			(6,348	)			(323	)			(6,671	)
Comprehensive (loss) income		$	9,656			$	(34,485	)		$	(24,829	)

		Nine months ended
		December 31, 2010
		Previously
		reported				Adjustments				Restated
Net (loss) income		$	35,161			$	(36,311	)		$	(1,150	)
Foreign currency translation			(873	)			(342	)			(1,215	)
Total other comprehensive income, net of tax			(894	)			(341	)			(1,235	)
Comprehensive (loss) income		$	34,267			$	(36,652	)		$	(2,385	)