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Capstone Turbine Corporation F1Q11 (Qtr End 06/30/2010) Earnings Call Transcript

Capstone Turbine Corporation F1Q11 (Qtr End 06/30/2010) Earnings Call Transcript

Capstone Turbine Corporation (CPST)

F1Q11 (Qtr End 06/30/2010) Earnings Call

August 9, 2010 4:45 pm ET


Jayme Brooks - VP, Finance and CAO

Darren Jamison - President and CEO

Ed Reich - EVP and CFO

Mark Gilbreth - EVP of Operations and CTO

Jim Crouse - EVP of Sales and Marketing


Sanjay Shrestha - Lazard Capital Markets

Eric Stine - Northland Securities

Walter Nasdeo - Ardour Capital

Shawn Severson - ThinkEquity



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Good day, ladies and gentlemen, and welcome to Capstone Turbine Corporation earnings conference call for first quarter and fiscal year 2011 financial results ended June 30, 2010. (Operator Instructions)

During today's call, Capstone management will be referencing slides that can be located at under the Investor Relations section.

At this time, I would like to now turn the call over to your host for today, Ms. Jayme Brooks, Vice President, Finance and Chief Accounting Officer. Please proceed.

Jayme Brooks

Thank you. Good afternoon and welcome to Capstone Turbine Corporation's conference call for the first quarter ended June 30, 2010. I am Jayme Brooks, your contact for today's conference call.

Capstone filed its Annual Report on Form 10-Q with the Securities and Exchange Commission today, August 9, 2010. If you do not have access to this document and would like one, please contact Investor Relations via telephone at 818-407-3628 or email, or you can view all of our public filings on the SEC website at or on our website at

During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, future financial performance in attaining profitability, the ability to reduce costs and improve inventory turns and contribution margins, higher average selling prices, continued growth in current market conditions, the availability of a line of credit, the success of the C200 and C1000 products, new products and technologies, compliance with certain government regulations and increased government awareness and funding of our products, growing market share and market adoption of our products, new applications of our products, growth in the oil and gas, office building, biogas, UPS and hybrid electric vehicle markets, the successful integration of Calnetix Power Solutions MicroTurbine business, revenue growth and increased sales volume, our success in key markets, our ability to enter into new relationships with channel partners and distributors and other third parties, and a successful implementation of those relationships, the energy efficiency, reliability and low cost of ownership of our products, and the expansion of production capacity and manufacturing efficiency.

These forward-looking statements are subject to numerous assumptions, risks and uncertainties, included the following. Our expectations about expansion into key markets may not be realized. Certain strategic business initiatives and relationships may not be sustained and may not lead to increased sales. We may not be able to reduce our manufacturing costs. The growth in our backlog has significantly exceeded our internal forecast. In order to meet this increased demand, we may need to raise additional funds to meet our anticipated cash needs for working capital and capital expenditures. The current economy can make it difficult or impossible for us to raise necessary funds or for our customers to buy our products. We may not be able to utilize our line of credit, for example, as a result of a failure to meet a financial covenant. We may not be able to expand production capacity to meet demand for our products. We may not be able to obtain sufficient materials at reasonable prices. Our release of new products may be delayed or new products may not perform as we expect. We may be unable to increase our sales and sustain or increase our profitability in the future. We may not be able to obtain or maintain customer distributor and other relationships that are expected to result in an increase in volume and revenue. We may not be able to comply with all applicable government regulations. We may not be able to retain or develop distributors in our targeted markets, in which case our sales will not increase as expected. We may not be able to successfully integrate the acquired Calnetix assets and achieve productive relationships with the distributors. And if we do not effectively implement our sales, marketing service and product enhancement plans, our sales will not grow and therefore we may not generate the net revenue we anticipate.

These are among many factors, which may cause Capstone's actual results to be materially different from future results predicted or implied in such statements. We refer you to the company's Form 10-K, Form 10-Q and other recent filings with the Securities and Exchange Commission for a description of these and other risks. Because of these risks and uncertainties, Capstone cautions you not to place undue reliance on these statements which speak only as of today. We undertake no obligation and specifically disclaim any obligation to release any revision to any forward-looking statements to reflect events or circumstances after the date of this conference call or to reflect the occurrence of unanticipated events.

I will now turn over the call to Darren Jamison, our President and Chief Executive Officer.

Darren Jamison

Thanks, Jayme. Good afternoon and welcome everyone to Capstone's first quarter fiscal 2011 earnings call. With me today are Ed Reich, our Executive Vice President and Chief Financial Officer; Mark Gilbreth, our Executive Vice President of Operations and Chief Technology Officer; and Jim Crouse, our Executive Vice President of Sales and Marketing.

Today again, I will start the call with a general overview of our first quarter results and then turn the call over to Ed who will review our financials. Ed will then turn the call back over to me, and I will discuss what is happening in some of our key markets and update you on our progress towards our strategic objectives of positive gross margin and positive cash flow.

As the operator indicated, we will be using slides today in our presentation today which can be found on the Capstone's website under the Investor Relations section.

The first quarter was another productive quarter at Capstone as the company continues to build positive momentum and executes against our business plan. During the quarter, as you can see on Slide 2, we continued to expand our distribution channels by reaching into territories where we've not had a presence in the past such as Hong Kong, Turkey, Pakistan, Indonesia, Netherlands, Denmark, Slovenia and Croatia.

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