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American Superconductor Corporation reported results for its fourth quarter fiscal 2011 ending March 31, 2012. In the reported quarter, the company incurred an adjusted loss of 34 cents per share which beat the Zacks Consensus Estimate of a loss of 38 cents. Loss in the reported quarter was also better than the year-ago quarterly adjusted loss of 58 cents per share. On a reported basis, the company digested a net loss of 42 cents per share versus a net loss of $3.67 per share, which included aggregate one-time asset write-downs, impairments and accrued charges.

Operational Statistics

American Superconductor’s total revenue of $28.6 million in the reported quarter was below the $59.8 million in the year-ago period. The downcast in revenues was due primarily to lower sales in the Wind segment, which suffered from a lack of revenue from its former customer Sinovel Wind Group Co. Ltd. Revenue was also below the Zacks Consensus Estimate of $29.0 million for the quarter.

American Superconductor digested a net loss of $21.2 million in the reported quarter versus a net loss of $185.1 million in the year-ago period, which included $155.3 million in aggregate one-time asset write-downs, impairments and accrued charges.

Financial Update

Cash and cash equivalents as of March 31, 2012, were $46.3 million versus $123.8 million as of March 31, 2011. Cash used in operating activities during the twelve month period ending March 31, 2012, was $141.0 million versus $22.8 million of cash used in operating activities in the year-ago period. To strengthen its liquidity position the company on June 5, 2012, entered into a $10 million loan and security agreement with Hercules Technology Growth Capital.

Looking Forward

Founded in 1987, Boston, Massachusetts-based American Superconductor has operations spread in Asia, Australia, Europe and North America. The company offers an array of proprietary technologies and solutions spanning the electric power infrastructure, including generation to delivery to end-use. The company is a lead player in megawatt-scale wind turbine designs and electrical control systems.

American Superconductor’s performance was impacted by business and contractual issues with its largest customer in China – Sinovel Wind Group Co. Ltd. Earlier, American Superconductor’s revenue growth largely relied on its customer Sinovel, China's largest and the world's third largest wind turbine manufacturer. However, since April 2011, Sinovel bogged down by high inventory levels refused to accept further shipments from the company and was unable to pay for past shipments.

American Superconductor sued Sinovel in November 2011, for payments for past shipments, and compensation for infringement of intellectual property rights. American Superconductor alleges that Sinovel illegally obtained and used its proprietary technology to upgrade its 1.5 megawatt wind turbines to meet proposed Chinese grid codes. The matter is now sub-judice, with American Superconductor seeking to recover more than $1.2 billion from Sinovel through civil cases filed in various Chinese courts.

American Superconductor, looking forward to the quarter ending June 30, 2012, expects that its revenues will exceed $26 million. The company expects that its net loss for that quarter will be less than $10 million, or $0.19 per share, which includes a benefit of approximately $7 million for the settlement of adverse purchase commitments with certain vendors. The company also estimates that it will have approximately $85 million in cash, cash equivalents, marketable securities and restricted cash on June 30, 2012.

In the near term, the Zacks #2 Rank (Buy) clearly suggests a window for short-term gains. Over the longer run however we maintain our market Neutral recommendation on the American Superconductor stock. American Superconductor competes with Anaren Inc. , AVX Corporation (AVX - Snapshot Report) and Rogers Corporation (ROG - Snapshot Report).

 

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