Good day everyone and welcome to American Superconductor's First Quarter Conference Call. This call is being recorded. All participants will be in a listen-only-mode until we reach the question and answer session. With us on the call this morning are American Superconductor's Founder and CEO Gregory Yurek; Senior Vice President and CFO David Henry; and Corporate Communications Director Jason Fredette. For opening remarks I'd like to turn the call over to Jason Fredette.

Thank you, Michelle. And welcome to the call everyone. Before we being, please note that various remarks management may make on this conference call about American Superconductor's future expectations, plans and prospects constitute forward-looking statements for pursues of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors including those discussed in the Risk Factors of our company's annual report on file with the SEC for the year ended March 31, 2009. These forward-looking statements represents the company's expectations only as of today and should not be relied upon as representing the company's view as of any subsequent day to today. While American Superconductor anticipate that subsequent events and developments may cause the company's views to change. The company specifically disclaims any obligation to update these forward-looking statements. I also would like to note that we will be referring on today's call non-GAAP net income or net income before amortization of acquisition related intangibles, restructuring and impairments, stock-based compensation, revaluation of stock launch, other unusual charges and any tax effects related to those items. Non-GAAP net income is a non-GAAP financial metric, a reconciliation of non-GAAP to GAAP net income can be found in the press release we issued and filed with the SEC this morning on Form 8-K. All of our SEC filings can be accessed from the Investor Section of our website at amsc.com. And finally, I would like to mention that we will be taking part in some upcoming conferences. This includes the Pacific Crest Tech Forum in Dale, Colorado on the 10th of August. The Citigroup Technology Conference in New York on the 15th of September and the Jefferies Clean Tech Conference in London on September the 30th. Now, I'll turn the call over to Greg.

Thanks Jason and good morning everyone. We are pleased to announce today the achievement of another record quarter at American Superconductor. A combination of additional strong growth in the China wind power market, crisp execution by our global manufacturing team and careful management of our expenses enabled us to grow revenues in our first fiscal quarter, maintain solid gross margins and increase our earnings quarter-over-quarter. This in turn has put us in good position to continue to improve our financial performance for the full fiscal year. China, and particular the China wind industry is the primary driver for our growth today. China's economy has continued to grow or be at the somewhat slower rate through the worldwide economic downturn over the last year. During this period of time, the Chinese government embraced to wind power as a key new way for them to generate electricity. And they ramped up investment in wind with an eye towards creating a wind turbine export business. In 2008, China grew its install base of wind turbines to about 12 gigawatts of power and early this year declare that it intended to add another 10 gigawatts or more in 2009. In the spring of this year, the Chinese Wind Energy Association projected China will grow its wind power install base to between a 108 and 132 gigawatts by 2020. And more recent reports state that China may exceed 150 gigawatts by that time. To put all those numbers in perspective 1 gigawatt is enough electricity to power about 500,000 U.S. homes or about 3 million Chinese homes. It's quite clear that the opportunity in China is tremendous and we are definitely taking advantage of the situation. Through our wholly owned AMSC Windtec subsidiary, we have aligned ourselves with five Chinese wind turbine manufacturers. These include…

Thanks, Greg, and good morning everyone. In our last conference call in May we provided some directional guidance for our first quarter -- fiscal quarter. We said we expected revenues to be flat or slight up over the 61 million we reported for the fourth quarter of fiscal 2008. We also said, we expected a rather significant sequential decline in gross margins, leading to a breakeven bottom line for the first fiscal quarter. As it turns out, Sinovel's continued dominance in China's burgeoning wind power market, stronger than expected D-VAR system shipments to customers in the U.S., Canada and the United Kingdom and better than expected fixed cost absorption at AMSC's Superconductors unable us to exceed this forecast. As a result, we report our strongest financial result to-date in the first quarter of fiscal 2009 as our revenue and profits grew to record level. For the solid first quarter behind us and a further ramp in Sinovel shipment ahead of us under current under our amended contract, AMSC is positioned to grow revenues by more than 40% or generating solid profits for full year fiscal 2009. And let me try and do our first quarter results. AMSC delivered 10th consecutive quarter of sequential revenue growth generating 73 million in revenue, an increase of 19% over the 61.2 million recorded in the fourth quarter of fiscal 2008 and an increase of 83% over the 39.8 million recorded in the first quarter of fiscal 2008. Sequential increase was driven primarily by higher D-VAR system shipments and shipments of our new D-VAR RT solution to Spain's Acciona Energy. These factors caused higher demand from Sinovel drove the year-over-year increase. AMSC Power Systems revenues represented 97% of total sales and nearly doubled in the first quarter of fiscal 2009 to 70.7 million form 35.9…

(Operator Instructions). And we will take our first question from Carter Shoop with Deutsche Bank.

Good morning guys. Congratulations on a great quarter.

Thank you.

Thank you, Carter.

In regards to the contract negotiation, can you discuss a little bit why didn't just keep the original length and increase the size of contract or is this because the entire module revolution incremental $20 million and we'd want to the in that sort of total number of shipment? And then based on those numbers its seem like the core business might have seen a little bit of push out and with that case is not or is being a little bit conservative here given a strong demand in China?

Well, Carter its Greg's speaking. I'll give a simple answer here is that, Sinovel kept ramping up and they kept pushing us for faster delivery monthly shipments. And we said probably sat with and said look, give us the numbers you want, when do you want to have all these shipments made. That became clear, we couldn't want to waste, we could have renegotiated all in the contract, that could have slowed things down, because we're up to make certain commitments in our assembling test operations, bringing new test equipments and so forth to expand capacity, which we've done by the way now. And we select not to renegotiate a contract, let's just condense the current contract and never talk about future orders, future years separately. So that's I think the long and short of it and when we said in the comments here, they're going to need more core electrical components for 1.5 megawatts wind turbines for 2011 and beyond and all by the way, we don't have an order for their 3 megawatt wind turbines for 2010 and beyond either. So those are the separate negotiations and we wanted to avoid any complexities profile. We will speed up the -- from both Sinovel and our self.

And also we to your question on the PM3000 versus the PM1000, its the Sinovel's interest to migrate to the PM3000, because that product is specifically designed for the wind market and have additional features that the PM1000 distributor doesn't have. So, Sinovel recognizes that it's a very good product and would like to migrate to us. That's the reason for that.

And by the way also when the original contract was signed June '08, there was the option in there for Sinovel to change to the ratio of PM1000 to PM3000 as time went on, this just going to take the full swing here to all PM3000s going forward.

And we'll take our next question from Paul Clegg with Jefferies.

Hey guys. First of all congratulation on the great quarter and the great outlook here.

Thank you.

Obviously, the acceleration of revenues under the Sinovel contract as you've kind of alluded has implication for the future ramp rates for orders beyond April 2011. So that you can just confirm with us that you have been having discussion with Sinovel about what does come after. And when we're talking about those types volumes which were obviously a huge, I was wondering what level of discussion your having at this point on pricing discounts just given the huge volumes we're talking about. Any margin implications that you could discuss related to that.

Well we are in very constant discussion with Sinovel on many fronts; don't forget we are developing -- co-developing a 5 megawatt wind turbine for them. They want to get us production in a couple of years as well. Helping them setup their first 3 megawatt wind turbines in Shanghai Harbor and then all the negotiations around future orders are almost a constant thing with them because they are moving so fast and they need to give us information, we need to be a putting that into our plan. So there us basically a constant negotiation of what's coming next? One example, is this amended contract which we handed out once with the next things here. The second part of the question Dave.

Was on pricing and in this particular amendment, there are others there is really no impact of pricing except for the pact the increase in the value of the contract to $20 million, it's really driven by the mix. Less PM1000s to be shipped by as compared to more PM3000s being shipped but there were -- contract pricing was not amendment in this current contract, that stays as is?

Yeah. And then by the way don't forget if there is any pricing pressure going forward we book that into our plans by exactly increasing our production of our products in China, which is reducing our prices and allowing us, we believe to maintain strong gross margin going forward.

And next we'll go to John Hardy with Broadpoint AmTech.

Yes, good morning guys. Thanks for taking to my call. Congratulation as well for the quarter, I guess my first question would be obliviously there is an increase in the revenue contributions in the Sinovel contracts on the PM3000 mix. I was wondering what impact do you expect that to have on the margins and better than the contract now?

PM3000, the gross margin isn't all that entirely different from the PM1000 even though we've added some features or things that it improves its functionality and the margins are relatively the same, but what we're trying to do as Greg just mentioned earlier to improve margins as to move more of that manufacturing in to China not only that but localize some of the sources of supply for the components for the PM3000, which as we told you last quarter is one element of why we expect some gross margin improvement to occur later in the year.

And next we will go to Jim Ricchiuti with Needham & Company.

Hi. Thank you. I did not see bookings number in the release. I was just wondering if you could provide that and talk a little bit how you see the orders shaping up with some of the other wind turbine manufacturers that you're working with over the next couple of quarters? Thank you.

Yes. Only -- we don't normally provide bookings or we do it. We provide the change in backlogs you can basically come to the bookings numbers by taking the difference, the reduction in backlog was 61 million minus the shipments are 73 comes to basically at bookings number of $12 million in all.

And Jim on the second part of your question about new licensees coming along, I have to comment on that earlier. We keep very good progress with our newer licensees to Hyundai of the world Shenyang Blower Works and so forth. And we've published previously, I won't go into going detail should we published previously what's the expected initial production time would be as well as going timing for volume production. And I think it's really change there. So we look for orders coming in from those new licensees. We've already said three to nine months ahead of their production schedules. So we'd expect to be seeing some orders to emerge soon, but we said also today in the call that just like Sinovel you probably get an order for a dozen separate co-electrical components are there about in the first orders, they go into the first production and then they will follow-on orders just like we saw from Sinovel.

And next we go to Timothy Arcuri with Citi.

Hi guys is its Jeff actually. I was wondering with the amendment of the Sinovel contract I was wondering if there is any real hose change in terms of how this 470 million comes in over the 28 months and so kind of straight line or its a kind of like those pattern here?

There is really no change assessed to; we still expect that shipments next year will be higher than this year and there will obviously, that contract ends in April of calendar 2011. So we don't have a full fiscal year here. So basically the shipments schedule don't change year-over-year all that much as compared to before in terms of in comparison to one another.

So it's still aggressively we always said it'll ramp first to second year, third year over second year second year over first year that's the case in terms of ramp which is all compressed now, which is a good thing.

And next we'll go to Megan Moreland with Ardour Capital.

Good morning.

Hi Meg.

Could you give a bit a more color on the expected improvement in gross margin over the rest of these years, is it more of a result of the product mix or cost reductions or price increases all of the above, just a little more color there?

Yeah we think all of the above.

Well, as we said we're -- our gross margin was about, was just under 31% in the first quarter, we are saying for the full year we expect to be in the range of 32 to 34%. That improvement will come from as I mentioned earlier, efforts that will begin to bear fruits in the second half of the year from localization of some of the sources of supply of components that we'll be manufacturing in China. And we're eluding our supply chain from U.S. and European sources to Chinese sources. That will help improve our gross margins, as well as the fact that factor increasing our guidance today, we have a higher percentage of our revenue coming from power systems and what are previous forecast was. So that has a beneficial effect on gross margins wells. Those are the primary factors.

And next we'll Ben Schuman with Pacific Crest Securities.

Good morning guys. Thanks for taking my call.

Sure Ben.

Are you guys seeing any D-VAR SVC opportunities or maybe incremental HTS projects in any stimulus grand proposals for Smart Grid?

While we commented today and we have a press release there in the last week in terms of, you knows money is coming in through existing contracts, I mean the question was where's the money is going to come from those contracts coming out of stimulus funds under Smart Grid Arena. There is a lot opportunity out there, Ben we continue to go after than both for the D-VAR and SVC as well as superconductor so I got to tell you on the D-VAR and SVC there is a lot of good commercial opportunity out there; we expect to see continued bulk in orders and sales of D-VAR and SVC not just in the U.S. but around the world including now China. So that's more I can you kind of a stimulus once per say; we're not accounting on that, we're not depending on it. Superconductors in terms of those stimulus funds and even the new American Clean Energy, Security Act that we talk about superconductor electricity pipeline; I have no idea whether that'll log as fast whether language that's already in there remains, you just don't know what they're saying, I had a time but if it does that's something we're giving to our industry. I mentioned that in my earlier comments and I want to focus on this we are engaged with many different potential customers or many different potential projects of superconductor cables in the U.S. Europe, China, Korea that's where the focus is, if could be made available, right? But don't count on them.

And our next question comes from Stuart Bush with RBC Capital Markets.

Yeah, hi guys. Thanks for taking my question. You mentioned the possibility of additional Sinovel contracts after April 2011, but are you a captive supplier to Sinovel that to your Windtec design win, or when will they be allow to seek alternative suppliers for electrical components?

Well, again by contract additional contracts, they'd buy the core electrical components from AMSC. So that's true for the 3 megawatts and it will be true for the 5 megawatts going forward. So nothing in the world there is a 100% certain, but we have contracts in placed. And probably more importantly than the contracts themselves is that we have designed ourselves to be in wind turbines. And they are proprietary components to this. And particularly in encrypted software that we like to control system while going to these wind turbine core electric component. So we have tried to make it as full proof as we possibly can and by the way our pricing is really quite good. Good gross margins but also good prices for your customers. So we have made pretty difficult for the Sinovel to the world to try to break the contract I guess and go out and find some other supplier. We confirm good shape here.

And our next comes from Pavel Molchanov with Raymond James.

Thanks for taking my question. And great job as everybody said. You indicated on last quarter's call that backlog is likely to decline in the course of fiscal '09. Can you give us any updated thoughts on that?

They did decline in business as we have reported today because we're working down through the main orders the Sinovel order and that's the long and short. Now as new licensees go to that initial volume production and then ramp after that, one would expect that we will be according forces here, some places that declined backlog levels out and spread to wide again. So we haven't any forecast to predictions but I believe we've given a lot of indication. So, I think you have to look that way.

And our next question comes from Jesse Pichel with Piper Jaffray.

Hi, congratulations Mrs. Yurek, Mr. Henry and team. I have a two part question. First is last quarter you were quite conservative and that didn't quite dovetail with your discussions with Sinovel. And I would like to know what in particular accelerated Sinovel, was it stimulus government directives protecting the steel industry jobs in the North of China, so that's my first question. My second question is in the solar industry the western suppliers point to core product qualities from China. And in solar the product quality is actually exceeded that of the western suppliers at a much price. How do you view the quality of these Chinese wind turbines at this point in the industry? And how long do you think it will China to become a factor in the global market and part of that is do you think these firms in China will have to manufacture in the U.S or Europe to penetrate those markets either because of shipping limitations or because of protectionism? Thank you.

Jesse thanks for sticking with the rule of one question. So first of all clearly the 586 billion in stimulus funds that Chinese government put out there in November of '08 has helped out the wind industry, because as part of the wind, nuclear as well by the way but wind is one of their core areas for meeting their needs for electricity for stimulating job growth in China I guess with respect to third part of your question I believe and because the third part question they see it as an export opportunity. We have mentioned steel, I always point out that China was the net importer of steel three-four years ago, now they are net exporter of steel. And we expect to see that in the wind turbine market as well. So in the midst of all that Sinovel is in particular really favored by the Chinese government and that that's clear, so they are really reaping the benefits of all these. But their very aggressive, very smart CEO Mr. Han who has taken full advantage of the situation, has put a really good team around here and to make sure his supply chains are all intact including on the core electrical component. So he is driving this very hard and part of the message here and there has been public documentation of this. They're going after the markets outside of China, U.S. included. The last part of your question which ultimately leads to let's say they do you penetrate the U.S. market; will they put up manufacturing here. I don't know the answer to that, watch when you would think at some point Sinovel volumes, we'd want to guess at that point. But just having the solar industry, I think you're started to see the quality of the Chinese wind turbine, Sinovel wind turbines. And particular at this stage of end being very high quality, payment shoot CFO dollars, good quality wind turbines coming out here. Lower cost base, they can compete on the world markets on the basis of equal quality I think and lower price. And they are talking about this probably. You can read in the Chinese newspapers, so on this reporting what are you going to read over there yourselves. So Sinovel is picked as a winner in the midst of all this and we look for them to be exporting wind turbines in the year -- next couple of years.

And we will take our next question from Vijay Singh with Janco Partners.

Good morning. The question is on superconductor. And it's given you all qualitative outlook for superconductors and the interest generating what's your profitability target on that; has that changed any or we continue to look at two to three years out?

What we've always said and we have reconfirmed this on a regular basis as an executive team it's in terms of wire shipments you need 3 to 4 million needles of wire shipped, out of door to achieve breakeven in the superconductor business. So that remains the same and maybe it can be lower in the future but that's the general number that to keep in mind. So do we get there win the orders and new project? And so I mentioned working aggressively on developing projects not just in U.S. but in Europe and China, Korea and those of projects will lead to top line growth potentially because we're the project manager we have done a number of cases but certainly in the wire world that's not going to drive that business to breakeven that breakeven and on to profitable growth.

So it's a reasonable to expect that it's going to be about two to three years out?

No you're the analyst you can make the forecast I am just giving you the numbers and that's all I can give you.

And well take a follow up now from John Hardy with Broadpoint AmTech.

Hey thanks for taking the follow up, two quick questions. One more logistical, what percent of the cash have view collected already in July from the increase in accounts receivable? And then Dave to hopefully I can get an answer out on this probably not but can you give the gross margin breakout on Superconductor as well?

Let me take the second one first. We don't disclose our segment gross margins unfortunately that's one of the things we keep to ourselves or we do disclose obviously the segment -- operating margins and we did for the quarter. With respect to your first question, I don't have the information at my finger tips, just to tell how much of our accounts receivables was collected in July, but I can tell you that for some of the shipments that occurred towards the end of the quarter for customer always like Sinovel or even as I mentioned earlier Acciona lot of that cash has already been received.

(Operator Instructions). And we will take our next question a follow-up from Jim Ricchiuti with Needham & Company.

I was wondering Greg given the enormous growth of the wind side business for you guys, has the amount of investment that you've put into this area in terms of R&D changed, or is it going to change going forward?

The wind industry you are asking about?

Yeah.

No, we've continue to invest in innovations in the wind side whether it's the superconductor sea tide and wind turbines, we'll get government help on them some of that of course, but we invest time of our Windtec engineering team on the design of the entire wind turbine system last year or power electronic guys out of Wisconsin as well of course our superconductor experts rotating the machine experts here and in Massachusetts. So there is makers on there. In terms of the PM3000W that was an investment we made over a year ago leading to the product launch in September. There are designs on the book for the next version of that already. More you learn from the customers for having all these thousands of wind turbines out there hooked up to many different power grid, more learning we have, more we can -- that can bring product innovations and we're doing it. And expect us to continue to do that, we'll continue in invest in the development of new product solutions for the wind industries; there's lots, lots of opportunity here will mean improvements in our revenue streams from existing and new licensees going forward, its going to increase our earnings going forward we believe. So we'll keep investing in there significantly going forward.

Our next question is a follow up from Carter Shoop with Deutsche Bank.

Hi guys two quick follow ups here. In your orders to China can you talk about the wind power tariff there and how you're moving away from awarding contracts based on pricing more to towards quality. I know you guys believe that Sinovel's quality has picked up quite a bit, are you concerned at all that we might start to feel a little bit more competition from foreign vendors. And then also on the balance sheet payables actually came down. I am curious why that happened given the back end loaded nature the quarter. Does that anything to do with the new Sinovel contract? Thank you.

You repeat the first part of that question, just the first half of the first question?

Yeah, I'm sorry. Those of new wind power tariff in China and China moved away from a purely pricing based awards with them with them with the wind farms. And it seems like the government admitted more and more towards evaluating quality more or so that they have in the past do you see possibly impacting Sinovel's share gains in that market over the next year?

I think the Carter what trump fall of that is in our policy in China and I don't see it change in that is they are going to stay they are the domestic suppliers, its done for the last four years or so, they're up the anti on that over the last 12 months reporting the domestic supplies, because they are. They want to they have seen opportunities to turn that into an export business. So they're going to favor domestic suppliers with their policies. Four years ago, five years ago it was 20% domestic wind turbine manufactures, 80% foreign, it's totally reversed today. I think that trend continues going forward. And as you said the earlier wind turbines, they may have a lot of problems, they broke a lot of things. But they're broking strictly in it and moved on solutions and then improvement. And so now they have quality wind turbines. And I think you'll see that quality continues to improve more forward. That will allow them to really enter that export business and Dave the second part of question.

Yeah, you had a question on payables, I want to comment to a couple of factors, payments to some contractors and not only our superconductors business but also some of our turnkey stuff D-VAR and SVC also what I guess what I told the Acciona effect; we have the Acciona effect on our days of inventory DSO; our days of inventory came down a lot of that inventory that was purchased as components to built the D-VAR RT was actually paid for in during the first quarter. And then during also the first quarter incentive payments to our employees on the annual plan from last year those payments were also made in the first quarter, so those would be the primary reasons.

And next we'll take a follow up from Timothy Arcuri with Citi.

Hi guys, its Jeff (ph). I just wanted to get your thoughts on in terms of I think this is actually a little bit early to act in a different way. I know there are probably margin improvement or some of the based on the AMT kind of manufacturing at least but can you just give us a little comfort or your thoughts on to the extent some of these gains might not be pressured by Sinovel, maybe pushing for more stable pricing and future contract?

Well, we always expect pressure from all customers, that's part of the game. And so when you anticipate that and it's not just a Dave already point this earlier, it's not just our cost of the final assembly and testing our future operation there is a benefit there. It's also that the components that restores and we spend a lot of our time qualifying multiple vendor's reason the component they go within to the core electrical component. There is an opportunity there quite clearly to reduce our cost and we have been doing that. So if we ever get price pressure, we haven't seen anything overwhelming or out of the norm, I would say at this time for sure. And we also get to pass that on to our vendors. And don't forget our model is that we outsource everything really that goes into PM3000W. We do the assembly of all those outsourced components to final test shipment out of door. So those write-downs through the supply chain of and of needs to. We'd anticipate that, we've already built that into our supply chain today. And I think we're going to do quite well. So we felt comfortable. We've increased our guidance on gross margin for this year and consider that's driven out this season well and we're anticipating new orders coming down earlier.

And we'll take our final question from Paul Clegg with Jefferies.

Hey guys, thanks for taking my follow-up. Just want to touch on the issue, there's been a lot of talk and some articles published about wind turbines and China not spinning networking not being connected to grid even sometimes. You guys heard any of that with Sinovel developments and then any concerns there about ultimate push back from the government making sure turbines are functioning perhaps slowing down a rate of growth of wind there do you spend much time worrying about that any reason from your perspective to be concern there?

All I see there is opportunity because part of the reason is that some wind turbines might not be turning in some places and I have nothing special to say about Sinovel, but it's a very good build out has in some places circling around the grid. Now the Chinese have recognized that earlier and have in place the for example 800 turbo DC direct current of power lines that they have been installing. They have been installing them already, there were lot more to do to build out the grid. There are all sorts problem that if finally recognize with dynamic of voltage control, remember we announced the first order was D-VAR for a substation in inner Mongolia served by seven wind farms announced that back in January of this year. That will be going in operation later this year, we expect it to be successful, we expect that that's going to give us more opportunity there and we expect by the ways to looking for cable. There is going to be an opportunity with Sinovel in the not too distant future in China. So, you can talk and turn that around on MIM to say that I think it's going to play opportunity on our grid side of our business here. But, we haven't seen anything obviously when you look at the order flow; we haven't seen anything slowing down order flow, either from Sinovel or from existing licensees who are putting up reference turbines and about to go to initial volume production. So haven't seen it, don't anticipate it and look for opportunity on the grid side.

And with no more questions in the queue, I'd like to turn the call back over to Mr. Greg Yurek for any additional or closing remarks.

Well thanks for your good questions today and for listening in to the call. We're really proud that we have now achieved our second quarter in a row of GAAP profitability. And we are very confident, we're going to achieve solid earnings to the full fiscal year and growth going head beyond that. So thanks again and we look forward to reporting back to you in the future.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation.