American Superconductor (News - Alert) (AMSC) today announced that, “in response to challenging conditions in the wind power market,” it has reduced its workforce by approximately 25 percent and is consolidating office space to reduce operating costs and enhance liquidity.
The company, based in the Boston metropolitan area, provides wind turbine electronic controls and systems, designs and engineering services that reduce the cost of wind energy.
It also has a smart grid division.
Following the loss of a major customer—Beijing-based Sinovel Wind Group—in 2011, AMSC was striving to stem losses caused by overcapacity and dwindling demand overall in the wind power markets.
According to Reuters (News - Alert), AMSC’s stock has lost more than 80 percent of its value since April 2011, when Sinovel refused to accept shipments.
In retaliation after Sinovel bailed out, AMSC went to court last November, alleging that the Chinese group had violated its sales contract and stolen software. To date, American Semiconductor has unsuccessfully sought to recover more than $1.2 billion through civil cases filed in various Chinese courts.
"If they can't solve the lawsuit with Sinovel in the near term, they may have to look to divest some of their subsidiaries to raise more cash," Ardour Capital Investments analyst Jinming Liu told Reuters. He believes that, if necessary, the company would let go of its smart grid business, which includes its semiconductor unit.
Reductions have been made across all of AMSC's major geographic locations and functions. The company now has a global workforce of approximately 340 employees—representing just about half of its payroll 15 months ago—and has offices in Australia, Austria, China, Germany, India, Korea, and the United Kingdom, as well as three in the United States.
"While the long-term prospects for renewable energy remain bright, conditions in the sector today are challenging," said AMSC president and chief executive officer, Daniel P. McGahn. "Financing and cash flow among wind farm developers and wind turbine manufacturers have been constrained, which has impacted growth plans for some of our Windtec Solutions partners. Given this environment, we made the difficult, but prudent, decision to reduce our workforce in order to weather the industry downturn and minimize our cash usage."
AMSC expects that the restructuring will reduce its annual operating expenses by about $10 million, to less than $58 million once the savings are fully realized in the fiscal quarter ending June 30, 2013. In total, the company anticipates that it will incur restructuring charges of approximately $3 million to $4 million over the next two fiscal quarters relating to the workforce reduction and office consolidations.
Of this total, AMSC expects to incur $2 million in cash severance costs during the fourth quarter of this year.
The company now expects that its net loss for the third quarter will be less than $24 million, or $0.46 per share. Factoring in expected payments and settlements, American Semiconductor anticipates that it will have more than $48 million in cash, cash equivalents, marketable securities and restricted cash on December 31.
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Edited by Braden Becker