Good day, everyone, and welcome to the AMSC Conference Call. This call is being recorded. [Operator Instructions] With us on the call this morning are AMSC President and CEO, Daniel McGahn; Senior Vice President and CFO, David Henry; and Senior Manager of Corporate Communications, Kerry Farrell. For opening remarks, I would like to turn the call over to Kerry Farrell. You may begin.

Thank you, Aaron. And welcome to our call to discuss our third quarter fiscal 2013 results. Before we begin, I'd like to note that various remarks management may make on this conference call about AMSC's future expectations, plans and prospects constitute forward-looking statements for the purposes 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 section of our annual report on Form 10-K for the year ended March 31, 2013, which we filed with the SEC on June 14 and subsequent reports that we have filed with the SEC. These forward-looking statements represent our expectations only as of today and should not be relied upon as representing our views as of any date subsequent to today. While AMSC anticipates that subsequent events and developments may cause the company's views to change, we specifically disclaim any obligation to update these forward-looking statements. I also would like to note that we will be referring on today's call to non-GAAP net loss or net loss before adverse purchase commitments, or recoveries, losses, stock-based compensation, amortization of acquisition-related intangibles, restructuring and impairment charges, Sinovel litigation costs, consumption on zero cost-basis inventory, noncash interest expense, change in fair value of derivatives and warrants, and other unusual charges, net of any tax effects related to these items. Non-GAAP net loss is a non-GAAP financial metric. A reconciliation of our non-GAAP to GAAP net loss can be found in the press release we issued and filed with the SEC this morning on Form 8-K. All of our press releases and SEC filings can be accessed from the Investors page of our website at www.amsc.com. And now, I will turn the call over to CEO, Dan McGahn. Dan?

Thanks, Kerry, and good morning, everyone. I'll begin today by providing an overview of our financial results for the third quarter of fiscal 2013. Dave will then review our financial results in detail and provide guidance on our fourth fiscal quarter. Following Dave's comments, I'll provide you an update on our business outlook. And after that, we'll open up the line to your questions. We had a stronger-than-anticipated third fiscal quarter, highlighted by increased revenues, improved gross margin, and reduced non-GAAP net loss. Much of our revenue growth was driven by our wind customers. We continue to reduce cash burn, and are reporting a higher cash balance than the previous quarter. The wind market in India has begun to sort itself out, now that the incentive structure has been clarified. The Chinese wind market is beginning to show signs of improvement. However, we do not see the immediate translation into our business. As expected, the political climate in Australia had an adverse impact for our D-VAR business in the third fiscal quarter. Despite these facts, which we expect will continue for several quarters, we remain optimistic that the markets we serve represent solid growth opportunities long term. Before I discuss our business strategy, third quarter highlights and business outlook, I'll turn the call over to Dave for our financial overview.

Thanks, Dan, and good morning, everyone. AMSC generated $20.6 million in revenues for the third quarter of fiscal 2013. This is up 18% from $17.4 million in the year-ago quarter. The year-over-year revenue growth was driven by higher wind revenues. Wind segment revenues for the third fiscal quarter nearly doubled year-over-year, primarily due to higher revenues from customers in India and China. Revenues from China include payment received from CSR for past shipments and services, for which revenue is recognized at the time of payment, whereas the associated costs were recorded in a prior period. Revenues from CSR also include product revenues from the sale of core components. Risk segment revenues decreased year-over-year in the third fiscal quarter, primarily due to decreased D-VAR revenues. The 12-month backlog as of December 31, 2013 was approximately $43 million, compared with $60 million as of September 30, 2013. The decline in the 12-month backlog is due to continued slow D-VAR bookings, as well as the pushout of contracted backlog for one of our wind customers in China. Gross margin in the third quarter was 22.9%, compared with 5.1% in the year-ago quarter and 6.5% in the prior quarter. The year-over-year and sequential increases were primarily due to the CSR revenue I referred to earlier. R&D and SG&A expenses for the third quarter were $11.2 million. This is down from $14.7 million in the year-ago quarter. The decrease is primarily due to the savings realized from our cost reduction actions in both fiscal '13 and fiscal 2012, as well as lower legal costs. More than 30% of this R&D and SG&A spending in the third fiscal quarter was noncash. Net interest expense was $1.6 million in the third fiscal quarter, of which $1.1 million was noncash interest expense. This compares with $3.5 million of…

Thanks, Dave. Let's start with our Wind business. We currently have wind turbine manufacturing partners in India and China in volume production, and we believe Korea will transition to volume production, based on local market demand. The wind turbines they manufacture using our Windtec Solutions technology result in some of the highest-performing turbines on the market today. While we generate revenue from the design services that we provide, the significant majority of our wind revenue comes from the sale of our electrical control systems. Our customers and volume production tend to place large, long-term contracts. Therefore, we do not receive new orders from customers every month, or even every quarter. These contracts lay out a delivery schedule that will fulfill their anticipated needs for that timeframe. However, our contracts also provide the customer the flexibility to adjust the contracted delivery schedule to fit their current business needs. One of our customers in China is not needing their original contracted delivery schedule. And during the quarter, we adjusted our 12-month backlog with this customer to reflect currently anticipated deliveries. I'll talk about the Chinese wind market in a few minutes. First, I'd like to discuss India. Our partner Inox signed the contract in February of 2013. Over the past 12 months, we've been consistently delivering product to meet Inox's growing demand. If Inox continues to execute to its forecasted growth, then it is reasonable to believe that we will receive a follow-on order for electrical control systems sometime in 2014. We have begun discussions with Inox, and we continue to reaffirm the close working relationship between the 2 companies. India continues to be a bright spot in the global wind market. With the Indian government's recent actions to encourage investment in wind projects, annual installations are expected to grow steadily for…

[Operator Instructions] And we will first go to the site of Carter Driscoll with Ascendiant Capital Markets.

First question. If we get back to your take on the inventory levels at some of your Chinese customers, can you maybe quantify how quickly you think those could be worked off and what factors might or might not affect that before you could potentially see a re-up?

Yes. I think what we've been able to do is to work very much in concert with them to understand their pipeline, to understand their backlog, to understand better when they're winning. I think the good sign this quarter is we're starting to see inventory move out of some of our Chinese customers' factories. We talk specifically about JCNE; they're very excited about their 3-megawatt, so that's going to come down the pipes, we believe, in the near term, which should add some additional growth potential for JCNE. I can't really get into specifics on how fast or how much inventory is moving, other than to say that I think we are cautiously optimistic that the signals that we're seeing in the Chinese market are different today, more positive than they were 3, 6, 9 months ago.

Okay. Can you remind us again -- obviously getting LVRT certification for the 3 megawatts positive. Can you mentioned again how -- typically how long certification takes?

Certification, that depends upon wind conditions, it depends upon where they are in the queue. These events have taken us as short as weeks to as long as several quarters. So we're not going to put out a timetable on when we think they're going to get certification, but the belief is, and the way to think about it is, they'll want to go out as soon as they can and go build a small wind farm, not just 1, but several using the 3-megawatt. And that's an extension of the current product line. That's a potential for revenue growth for us, and we're looking at that with optimism, and it's really because of the tremendous effort of a lot of our employees in China, really centered around Austria and in our U.S. sites that it's been a combined effort across the company to get JCNE to this point.

Maybe shifting gears a little bit. Could you -- you talk about some of the D-VAR opportunities in some of the emerging markets, and maybe lift the hand for me -- you've talked about, I think, South Africa before, and I believe it's Romania, maybe outside of what your traditional strength, U.K., Australia and the U.S. And then I want to talk about the PTC a little bit and its effects for this year.

Yes -- I mean, kind of from an overall trend, what we're seeing is, as more of these markets, and some of the ones you have mentioned, but we see it also in Continental Europe, we see potentials in the Middle East, we see potential in South America as well, that as they start to adapt renewables on a rate where they're doing hundreds of megawatts, that they're looking at some of the other geographies on how they handle grid interconnection. And I think what you're seeing is some of the emerging markets that are adopting renewables later than U.S., China and the traditional Western European markets are taking advantage of the full complement of technology that's available today. That in designing a grid, particularly using D-VAR in that mix, really helps protect the grid against problems that could occur in the future, as wind and renewables proliferate in those geographies. So I think our team has done a very good job of trying to market the advantages of putting D-VAR into the market earlier than maybe we've seen, particularly in some of the Asian markets. And it seems that in these markets, that they're willing to pay for the product, and that they see it as a way that they can really continue to develop the wind market at the rates that they want to go. Many of these countries have targets out there they have to meet that are still quite aggressive. So there's more wind coming in these markets, and that's why we want to be there and participate in them, and to make sure our products are formatted in the right way for these markets.

Okay. And then just -- take on the PTC, looking at -- obviously last year, hoping for a similar type of pattern [Audio Gap] gets reinstated, or maybe attaches in amendment. You did see, I think, at least the wind projects really slow in the first half of the year, but it sounds like you believe that, and because there were significant tick-up in the second half of the year, you still have a pipeline, at least for a particular period of time. How do you see that flying out, at least, as comparison to last year?

Yes. I think the thing that's perhaps different is, for instance, if you were predicting a rush at the end of calendar '13 for D-VAR, that that's probably a little bit off in time, because the way the PTC is structured for 2013 is, that the project only has to begin before the end of calendar 2013. So what we're anticipating is, whatever -- and the PTC rush means that whenever these projects would naturally complete, they're going to require the D-VAR product towards the end of the product -- project life cycle, towards connection to grid, towards commissioning of the power plant. So that means in 2014, we see good visibility on projects in the U.S. An interesting fact though, as we start looking at some of our larger turbine technology. We want to think about a vision for the company to be in wind without a PTC in the U.S. And the U.S. Energy Information Administration states that wind is about $86 per megawatt hour without the PTC. And this compares today with natural gas at about $67 per megawatt hour, obviously wind being a little bit more expensive than natural gas without the subsidy. But less than coal, which is at about $100, and nuclear which is maybe $108, $110. So I think what we're trying to work with our partners in the marketplace is to understand what life for wind in the U.S. could be beyond the PTC. And I think it comes down to certainty of financing, it comes down to looking at wind sites, perhaps for lower speeds, it comes thinking about the wind market in the U.S. differently. I think when you look at the past, the PTC is -- without it, it's really turned off the wind market because the assumption is that it will come back and I want to wait for it. I think going forward, I don't know if people are going to be waiting for it to come back. If you're going to want to develop wind resources in America, you're going to have to figure out how to do it without the PTC. And that's where a lot of our technology, we think, will help be a differentiator in this market.

Okay. And just maybe expanding a little bit. You obviously introduced a new product recently, the fault current limiters. Is that something that you're getting something [indiscernible] talk about that new product? And then, I just have one last follow-up if I may.

Yes, the product that we focused on, and again, this is different than wind, this is on the other side of the grid. So this is within the distribution system, this is the system that touches your business or touches your home. And yes, we had significant quoting activity, we have conversations, where we focus principally in the U.S. because we see a lot of the macro events that have occurred in the U.S around acts of terror, around storms, around issues of people trying to maliciously take out substations. That there is an appetite in America for hardening and making the grid more resilient. And then positioning the grid not only for increased reliability, but for capacity in the future. And through all the work that we've gone through with our team here, with our supply chain and with the project that we're working on with the Department of Homeland Security today, with ConEd in New York, we basically believe we have a way to solve this problem that is unique to our company, that is defensible by our company, and that it uses proprietary technology and should change the way that we think about orders coming into at least the Gridtec part of our business because some of these projects, compared to what our revenue levels today are, are substantial.

Just last question. You talked about -- obviously, you have done a good job this quarter shoring up the balance sheet. You still are potentially -- actively looking to divest your minority equity positions. Can you talk about Tres Amigas and some of the hurdles it must come over? I mean, do you have a significant minority position in that? And what that may or may not be able to do in terms of selling superconductor wire, if that project continues to move forward and you get that last piece of financing?

This is Dave. We have about a 26% ownership stake in Tres Amigas. Right now, they are in the process of raising capital for their Phase I construction. Phase I construction is for a 750-megawatt back-to-back line between the Eastern grid and the Western grid. That process is underway, it's ongoing. What I am being told, things are going well. And it's really about all I can say for it at this point in time. But in terms of the future of any -- for superconductors with Tres Amigas, it would not be until, at the earliest, Phase II. And Phase II would be a more fuller fit out of the facility towards its vision that they have ultimately 5 gigawatts. But we have -- if there are to be superconductors in that, I mean, we would obviously have to be competitive with other alternatives before that could happen. So...

And we've been talking about that for a while now. I think the focus of Tres Amigas is to get the project really started, get it in the construction phase. And if the model makes sense, the belief is that the demand will come, and then therefore, they'll need additional capacity beyond the first phase. And then we stand a chance to implement superconductors, if and only if, that capacity comes.

[Operator Instructions] We'll next go to the site of JinMing Liu with Ardour Capital.

First of all, just a housekeeping question. May I -- may have missed this. How much was the zero cost revenue for the quarter?

It's in our non-GAAP table, JinMing. It was the inventory consumed. We don't report zero cost revenue, but the inventory that was consumed that had been previously written off was $1.1 million. And that's an add-back to our non-GAAP results. We don't take credit for it. But the real margin -- if you're asking what the margin benefit was during the quarter, it was really due to the CSR revenue that I mentioned, that was 100% margin.

Right, that's what the -- that's what my question was about. How many revenue did you recognize from the CSR.

Yes. They were 18% of our revenue. And the consumption of zero cost inventory, it was $1.1 million in the quarter. But that's kind of been the run rate here for the last few quarters.

Okay, got that. Okay. I think another question relate to a CSR story. Recently, I think they got a big contract, about 500 megawatts. Those are a mix of 2-megawatt and 1.5-megawatt models. Are they going to use your components in those turbines?

That's an open question, I think. They don't have a 2-megawatt from us, and we don't believe that they have one that they have -- ready yet to deploy. Could that be an opportunity for us? I don't see why not. Clearly, the relationship between the companies -- we demonstrate that they're active with us again, with kind of clean up the past and move forward to a future. So I guess I'm cautiously optimistic, always, JinMing, in China. But we have a nice 2-megawatt platform that's done quite well outside China. And we are in this business of transferring additional technology to partners.

Okay. A question related to the Chinese market in general. From the data I have seen for 2013, it looks like the markets currently was, at least for the '13, was concentrated into a few large companies, turbine producers like [indiscernible] has some sort of relationship with the state. I just -- what's your take of your customers, like JCNE competing against those larger competitors?

Yes, I think the big 4 take a good fraction of what's in China, but I guess I'm still comforted by the fact that there's still a pretty big distribution through the top 20 players that you don't see. This thread of consolidation that was once, maybe 2 years ago, impending doesn't seem to really have happened. I think the thing when we meet with JCNE's senior management, it's clear that they're going to be in the Wind business for the long term, at least that's what they're communicating with us. They're getting the 3-megawatt going now. We do have a deal with them for the 5.5-megawatt turbine with them. And they believe that they're going to be a player here. We want to see that move and start to bring more inventory out of their factory, and we're starting to see the beginning of that now. So I think our thesis of allowing some of these guys to take share, be it JCNE, or XJ, or CSR, or whomever, is a correct one because the technology that they're delivering to the market from a cost-performance standpoint is at least equal, if not superior, to some of these other players. And I think that you've seen of the larger players, like our former friends, significantly stumble in the market. And I think that opens up a window of opportunity for some of our good partners in China to take share.

Okay. Switching gear to Indian market. One thing I observed that actually alarmed me a little bit, is that some Chinese turbine producers team up with local companies trying to get turbines into that market. But I think they got some early success so far. What is your take on that trend?

Yes, I tend to try to listen to Inox and the developers that we talk to in China. The Chinese want to market there winds outside China. I think that given what's gone through a market correction in China here over the past couple of years, in order for these companies to really grow, they have to get outside China. India is an obvious market, given the growth, and that's partly why we're excited about it. But our Indian partners, rightly or wrongly so, they don't seem threatened by the emergence of the Chinese manufacturers. And I think the reasons are that they're able to make a turbine at similar costs to a Chinese turbine. So they don't see the Chinese coming in and significantly, negatively affect pricing. And you have established names. I mean, the thing we hear about when we look at what our customers think of Inox, the things that they like about them is they're Indian, and that they're supported by a very large company behind them. That's helped Inox to be able to gain share and take share away from Suzlon. In the long term, will there be Chinese players in the Indian market? Sure. Will they take some share? Sure. Could they be some of our partners? Certainly. But we see our focus in India really is through Inox, and we want to make sure that they get their objectives, and they'd like to become the top 1 or 2, they're #3 right now. And we want to do everything we can to support them because they have a product on the market that basically beats everybody when they're able to compete heads-up with just the turbine.

Well yes, that's a good point with just turbine. Because I know what the strategy of some of -- at least, some of Chinese turbine producers are [indiscernible].

And I think so far to date, and I think there's been some announcements, but -- and the Chinese can be -- I mean, the Indians can be wrong about their own market, but there doesn't seem to be prevalence of fear of that coming. I mean, that was supposed to come to America, never really happened, right? I think it's a good model. I mean, I think the Chinese have -- they're on to something, but they have yet to be able to demonstrate more than press releases about growth of their wind turbine companies beyond the Chinese market. And I think our challenges that we've had with Sinovel have not only affected Sinovel, but to some extent affected some of the other large names trying to export out of China.

Okay, that's a good point. Okay. Lastly, is there any update you can forward us regarding your potential contracts with the Navy -- U.S. Navy?

The main product that we're looking at and what we've talking about here for the past quarters is the launch of this protection system for the surface fleet. What it does is it helps to increase the sensitivity of the protection for the ship from mines. But it's also really dramatically able to change the weight payload of the system that provides this feature today. So as the ships get more concerned about weight, as the ships want to be able to be in theater closer and closer to the shore, the features that our system deliver are directly in line with where what the Navy wants to go. We work very nicely in a partnership with the U.S. Navy for the design to develop the test, the qualification of the system. And as I said in the prepared remarks, that we believe, in the near term, we're going to see an order for that system. The thing to think about again, as AMSC, as the new company, what we're doing is we're delivering full systems when it comes to superconductors. Similar to what we do with our power electronics, we want to deliver full value to the market, and that means further IP protection, it means further content, and it means a direct interface with the end customer; in this case, really the Navy and the shipyard building the ship. So we think we have a very nice product that is going to be needed in the near term, and a business that we're going to be able to protect in the long term from a technology, from a content, from an IP standpoint because one of the good things about the United States of America is we do believe in intellectual property.

And we have an extra turn on the side of Carter Driscoll with Ascendiant Capital Markets.

Yes. I actually thought we were going to get through call without mentioning the word Sinovel. Could you maybe just give us an update on the litigation and the potential that after announcing another really bad operating performance that it might get delisted? And any impact you think there may be if they were to continue to fall down on their own performance?

Yes, I'll just give you an update on where we are, and what we think it means in kind of trying to read through the tea leaves here. We continue to wait a decision from China Supreme People's Court on the jurisdictional matter that we've discussed. The U.S. case continues to make its way through the system. But I think good news for us has occurred over the past few weeks, where the media has really been focused on Sinovel, their struggles to grow, their cash burn, and the fact that they're under investigation by the Chinese Securities Commission. It's clear that Sinovel has management challenges and growth challenges, and we see those linked together. These factors, along with our case, serve to continue to put pressure on their management to either change or change the way they do business. In order for Sinovel to really deliver on what its shareholders want, it's going to have to ship product outside China, and that road goes through American superconductor.

And this does conclude the Q&A portion of our program. I'd now like to turn the program back over to our presenters for any closing remarks.

Great. Thanks, Aaron. I think we were pleasantly surprised to be able to deliver these good results for the third quarter, better than we had anticipated. If we look at cash, which is the main metric, we know we're looking at, and everybody wants to understand, not only outside the company, but inside the company. In actuality, our year-to-year cash and cash equivalents, if you just look at that part of the balance sheet, they've only changed by about $4 million year-to-year. We only burned about $4 million here in the December quarter, and from what Dave was saying with the numbers looking forward, we're going to burn about that same amount of money, we believe, for the fourth quarter. We have $40 million in the bank, so we believe that from a liquidity standpoint, we sit in a very good situation today. We have more levers that we can deal with. We want to grow revenue. We want to continue to manage our cost, we're actively pursuing the sale of the non-core assets that we've described, and we do have this at-the-market system setup that we can continue to enhance liquidity in the future, if necessary, through that mechanism. So we're focused now on getting to that objective of getting to cash flow positive, and how we have to do that are by growing our revenues. So thank you, everybody, for your attention, and we look forward to getting back to you here in 2014 to report on our full fiscal year results here in a few months. Thank you, everyone.

This does conclude today's program. You may disconnect at any time.