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AMSC Realigns Operations to
Accelerate Drive to Profitability
Westborough, MA, 29 March 2007:
American Superconductor
Corporation (NASDAQ:
AMSC), a leading energy technologies company, today announced the
implementation of initiatives designed to transition the company's high
temperature superconductor (HTS) products to the manufacturing stage and
accelerate the company's drive to profitability.
The company said the actions taken today, which
include a reduction in force, consolidation of facilities and streamlining of
operations, are expected to yield a cost savings at AMSC Superconductors of $4
million in the fiscal year ending March 31, 2008 ("FYMarch'08"). The company
also said it is firmly on track to cut its cash burn in half in FYMarch'08
compared with FYMarch'07 given the decline in the rate of capital expenditures
for the scale up of manufacturing of HTS wire; the increasing positive cash flow
from AMSC Power Systems; and the cost reduction actions undertaken today. The
company said it expects to have a strong cash position as it enters the next
fiscal year, and that it is on plan to achieve positive EBITDAS in FYMarch'09.
The company has reorganized AMSC Wires,
SuperMachines and Power Electronic Systems into the following two business
segments:
-- AMSC Superconductors: This
business combines the capabilities
of AMSC Wires and SuperMachines, focusing
on the production of
HTS wire and coils, the design and
development of HTS products,
such as motors and fault current limiters,
the licensing of HTS
product designs and the management of
large-scale HTS projects.
-- AMSC Power Systems: This business focuses on the
production of
power electronic systems for the utility,
industrial and wind
power markets. It also provides licensed
designs for wind
energy systems through its Windtec(TM)
subsidiary.
"Having achieved a series of recent successes on
the HTS side of our business, including the completion of factory acceptance
testing of our 36.5 MW HTS motor, we are taking action to transition fully to
the manufacturing stage with HTS products while also reducing expenses and cash
burn," said Greg Yurek, founder and chief executive officer of AMSC. "From a
cost perspective, we have streamlined our business units, consolidated
facilities and realigned global headcount consistent with near term revenue and
profit opportunities. These actions will yield substantial savings in the
quarter beginning April 1, 2007.
"These changes are strategically important, and
we believe they will provide dramatic benefits," Yurek added. "AMSC has built a
significant portfolio of technology, patents and know-how related to HTS
rotating machines - machines we have built and tested to verify our technology.
It has never been our plan to invest in the substantial infrastructure needed to
manufacture large-scale motors, generators, synchronous condensers, industrial
motors and wind generators. Instead, we have utilized an outsourcing model.
"Going forward, AMSC Superconductors plans to
license designs for HTS rotating machines to companies that have the
infrastructure to manufacture these systems. As is the case with our new Windtec
subsidiary and its wind energy system licenses, AMSC would receive license and
consulting service fees from these companies and would benefit from a growing
stream of royalty payments and revenues from the sale of HTS wire and coils to
its licensees."
AMSC Superconductors will operate out of the
company's 355,000 square-foot manufacturing facility in Devens, Massachusetts.
The company's SuperMachines facility in Westborough, Massachusetts will be
vacated and its remaining core of HTS rotating machine engineers and equipment
will be relocated from Westborough to Devens as of March 31, 2007. The remaining
six months of the lease on the SuperMachines facility in Westborough will be
written off as of March 31, 2007.
Since December 31, 2006, AMSC increased its
headcount from approximately 238 to 288 primarily as a result of its January 5,
2007 acquisition of Austria-based Windtec. In conjunction with the
reorganization and consolidation of facilities, AMSC today reduced its
Massachusetts staff by 37 employees, or approximately 13 percent of the
company's overall headcount. Most of these reductions are effective immediately.
The reduction in force, the consolidation of facilities and the streamlining of
operations are expected to yield approximately $4 million in annual cost savings
for AMSC Superconductors in the quarter starting April 1, 2007.
The company plans to increase headcount at AMSC
Power Systems in the months ahead through its previously announced acquisition
of Power Quality Systems, Inc. and through additional strategic hires for the
company's Wisconsin and overseas operations to support rapid revenue growth.
As a result of the actions announced today, AMSC
expects to incur restructuring charges of approximately $1.1 million, or $0.03
per share, in the fourth quarter of AMSC's FYMarch'07. Of this total,
approximately $400,000 is for severance, $200,000 for lease abandonment costs
and $500,000 for relocation expense. A small number of affected employees will
remain with the company for several weeks to complete ongoing projects, which
will result in additional severance charges of approximately $200,000 in the
quarter starting April 1, 2007.
"With our HTS motor and synchronous condenser
projects now virtually complete, it is the opportune time to consolidate our
superconductor-based operations into AMSC's state-of-the-art facility in Devens,
Massachusetts," Yurek continued. "These initiatives will help commercialize HTS
products faster and also accelerate the company's drive to profitability."
Update on Key Objectives and Financial Forecast
-- HTS Wire Manufacturing
Capacity: AMSC exceeded its objective to
have installed, commissioned and qualified
70 percent of the
full-scale equipment needed to achieve a
manufacturing capacity
of 720,000 meters of 344 superconductors
per year. To date,
AMSC has installed, commissioned and
qualified 75 percent of
the equipment. The company remains
confident that it will have
720,000 meters of manufacturing capacity in
place in December
2007.
-- HTS Wire Shipments: AMSC continued to seed the market for
HTS
wire and exceeded its objective to ship
10,000 meters of 344
superconductors in its fiscal year ending
March 31, 2007. AMSC
has shipped 11,500 meters to 26 customers
in eight countries in
FYMarch'07. The company also achieved its
electrical
performance and manufacturing cost targets
for commercial-grade
344 superconductors.
-- HTS Motors: As the company announced yesterday, AMSC has
successfully completed factory acceptance
testing of the
world's first 36.5 MW HTS ship propulsion
motor. The motor is
now ready to be delivered to the U.S. Navy.
-- SuperVAR(R) Synchronous Condensers: Two SuperVAR
synchronous
condensers are in the factory acceptance
testing mode prior to
shipment. The company expects to recognize
revenue for these
two machines in the first half of
FYMarch'08.
-- Financial Forecast: For the full fiscal year ending March
31,
2007, AMSC expects:
-- $50 million to $52 million in
revenue, in line with the
company's previous
forecast.
-- Approximately $70 million in
backlog as of March 31, 2007,
at least $60
million of which is expected to be
recognizable as
revenues in FYMarch'08, in line with the
company's previous
forecast.
-- A net loss in the range of $32
million to $34 million, or
$0.96 to $1.02 per
share. AMSC previously forecast a net
loss for the full
fiscal year ending March 2007 of $29
million to $32
million, or $0.87 to $0.96 per share. The
forecast has been
revised to account for the aforementioned
$1.1 million, or
$0.03 per share, in restructuring charges
as well as a
continuing funding delay from the U.S.
Department of
Energy (DOE). DOE funding is now expected to
be received in the
quarter starting April 1, 2007.
-- A balance of approximately $33
million to $35 million in
cash and
investments as of March 31, 2007. The final
balance will be
approximately $33 million if an anticipated
collection of $2
million is not received from the U.S. Navy
by March 31. In
that case, the company expects to collect
more than $6
million in cash from the Navy in the quarter
starting April 1,
2007.
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