American Superconductor Corporation — Form 10-K Summary
Reporting period: Fiscal year ended March 31, 2019, filed June 5, 2019. The request metadata says “2018 Q4,” but the supplied filing is an annual report for FY2019; the figures below follow the filing. Amounts are U.S. dollars.
Business context
AMSC supplies megawatt-scale power solutions through its Grid and Wind segments. Grid serves utilities, renewable-energy developers, industrial customers and the U.S. Navy; Wind supplies turbine electrical control systems, designs, licenses and support services. The company’s technologies include power electronics and high-temperature superconductor wire.
Financial results and liquidity
| Metric | FY ended Mar. 31, 2019 | FY ended Mar. 31, 2018 |
|---|---|---|
| Revenue | $56.2 million | $48.4 million |
| Gross profit / margin | $14.0 million / 24.9% | $3.8 million / 7.8% |
| Operating income (loss) | $34.0 million | ($32.2 million) |
| Net income (loss) | $26.8 million; $1.32 basic EPS | ($32.8 million); ($1.73) basic EPS |
| Operating cash flow | $42.7 million | ($24.8 million) |
| Cash, cash equivalents and restricted cash | $78.2 million | $34.2 million |
| Total assets / total liabilities | $119.3 million / $38.1 million | $88.2 million / $35.9 million |
- Revenue grew 16%; Wind revenue rose 53% to $21.9 million while Grid revenue was nearly flat at $34.3 million.
- Gross-margin improvement reflected lower depreciation and fixed factory overhead. R&D was $9.9 million (down 15%); SG&A was $22.0 million (down 2%).
- FY2019 net income included a $52.7 million net gain from the Sinovel settlement. Excluding specified items, AMSC reported a non-GAAP net loss of $13.0 million, or $0.64 per share.
- Operating cash flow included the Sinovel proceeds; on the company’s non-GAAP basis, operating cash flow was negative $7.6 million. Investing cash flow was positive $2.2 million and financing cash flow was negative $0.3 million.
- Management reported no outstanding debt other than ordinary trade payables. Current assets were $103.4 million and current liabilities $28.4 million. Restricted cash was $0.7 million; cash and cash equivalents were $77.5 million.
- The company had an accumulated deficit of $961.5 million and states that it has historically incurred operating losses and negative operating cash flows. Management believes liquidity is sufficient for the next 12 months.
Material changes and unusual items
- Under a July 2018 settlement, Sinovel paid $57.5 million in two installments, recognized as a $52.7 million net gain after legal and other direct costs. AMSC also granted Sinovel a non-exclusive intellectual-property license for specified turbine use and agreed not to sue for covered use.
- Wind segment operating income was $48.1 million, versus an $8.9 million loss in the prior year, chiefly reflecting the settlement and increased shipments to Inox. Grid recorded a $10.6 million operating loss, improved from $19.0 million.
- Warrant fair-value changes produced a $3.7 million loss, compared with a $0.7 million gain in the prior year. Warrant liabilities were $4.9 million at year-end.
- Income tax expense was $6.4 million, compared with a $0.2 million benefit. The filing cites foreign-balance repayments, a dividend following the settlement and expected withholding taxes as factors.
- Cash increased by $44.0 million year over year, primarily reflecting Sinovel receipts. Inventory declined to $12.1 million from $19.8 million; the company recorded $0.9 million of inventory write-downs.
- AMSC adopted the new revenue-recognition standard in April 2018; the opening retained-earnings adjustment was less than $0.1 million and the ongoing impact was not material. Adoption of lease accounting in April 2019 was expected to add $3–$5 million each in net lease assets and liabilities.
Outlook, risks and contingencies
- AMSC expects the ComEd REG project to begin construction within six months after DHS approval and become operational in 2021. Expected DHS funding/revenue over the subcontract term is $9–$11 million; AMSC agreed to provide a $5 million irrevocable letter of credit. Approval remains a condition, and government contracts may be terminated or funding may be delayed.
- Inox accounted for 34% of FY2019 revenue; Vestas accounted for 15%. Inox’s future shipments depend on its execution of Indian wind-auction orders and its own turbine deliveries. AMSC disclosed approximately $47.5 million of remaining performance obligations expected within 12 months, including forecast shipments to Inox; timing remains subject to customer actions.
- Other key exposures include international sales and currency movements, dependence on limited suppliers and collaborators, wind-policy incentives, competitive pressure, commercialization and manufacturing challenges for superconductor products, and the need for performance bonds or letters of credit.
- BASF elected not to extend its joint development agreement beyond March 3, 2019, eliminating a scheduled $1.0 million payment for 2019. AMSC reported no material legal proceedings. Management and the auditor concluded internal control over financial reporting was effective; the auditor issued an unqualified opinion.
Important facts for investors to verify
- How much of FY2019 earnings and cash generation depended on the one-time Sinovel settlement, and whether recurring operations can approach profitability.
- Inox’s order conversion, shipment schedule and share of revenue, alongside the concentration represented by Vestas and other major receivables.
- DHS approval, funding, project timing and the liquidity impact of the $5 million letter of credit for Project REG.
- Cash availability after restricted balances, lease obligations and performance-bond requirements, and whether additional financing may be needed.
- The filing’s period labels and comparisons: use the audited statements for years ended March 31, 2019 and 2018, as some narrative passages use inconsistent fiscal-year references.