Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Leah Gibson – Director of Investor Relations

Charles S. Rhoades – President, Chief Executive Officer & Director

Aaron M. Gomolak – Chief Financial Officer, Executive Vice President & Treasurer

Analysts

Colin Rush – Sync Equity

Dale Pfau – Cantor Fitzgerald

Jessie Pichel – Jefferies & Company

Carter Driscoll – CapStone Investments

Joseph A. Maxa – Dougherty & Company

Adam Krop – Ardour Capital Investments

Al Shams – MidSouth Capital

SatCon’s (SATC) Q3 2011 Earnings Call November 8, 2011 9:00 AM ET

Operator

Welcome everyone to SatCon’s third quarter 2011 conference call. Today’s call is being recorded. You may listen to the webcast on SatCon’s website located at www.SatCon.com. In addition, today’s news release is posted on the site for those of you who did not receive it by email. With us today are SatCon’s President and Chief Executive Officer Steve Rhoades, Executive Vice President and Chief Financial Officer Aaron M. Gomolak and Director of Investor Relations Leah Gibson. At this time for opening remarks I would now like to turn the call over to Ms. Gibson.

Leah Gibson

Before we begin, please note that the comments made on this conference call today may include forward-looking statements that involve a number of risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements and may include the words believes, anticipates, plans, expects, intends and similar expressions which are intended to identify forward-looking statements.

Important factors that could cause actual results to differ materially from those inferred by such forward-looking statements are set forth under the caption risk factors in SatCon’s quarterly report on Form 10Q for the quarter ended September 30, 2011. These factors are included there for reference. Once filed with the SEC copies of the 10Q will be available from SatCon upon request and will be posted to the company’s investor relations website at www.SatCon.com.

In addition, today’s call is being recorded and a webcast/webplay will be available on the investor relations website. This conference call and associated records belong to SatCon and are prepared for the benefit of our investors. With that, I’ll turn the call over to our President and CEO Steve Rhoades.

Charles S. Rhoades

Let me begin by providing an overview of our performance this quarter and then Aaron will take you through the financials before we turn the call over to the operator for your questions. Briefly recapping our top line results, revenue for the third quarter was $45 million in line with our reported guidance and relatively flat over sales during Q2 of this year. Despite the compounding effects of reduced panel prices delaying many projects and the continued slowdown of the European solar market, demand for our large scale inverter solutions has remained strong resulting mostly from the robust growth in North America.

Revenues in North America in the first nine months of the year grew 131% over the same period in 2010. Shipments into North America in the 2011 period increased 168% compared with last year, while global megawatts grew 68%. To date, we have shipped over 653 megawatts of our solutions, putting us in a strong position to surpass the 688 megawatt mark we achieved for the full year in 2010. This growth has also been fueled by business with our four large EPC customers where we have grown revenues 87% year-over-year and megawatts shipped to these partners by 119% in the same period.

Looking at the quarter, we continue to see our strongest performing solutions within the large scale commercial and utility segments greater than 250 kilowatts where we shipped 151 megawatts out of a third quarter total of 181. Gross margin for the quarter was 12% compared with 8% in Q2. As we discussed on our Q2 call, we’ve initiated a number of actions to improve our margin performance. We are resizing the company to align our cost structure with projected revenues implementing material cost reduction programs across all our product lines and continue to execute on product innovations that allow us to capture a greater portion of balance system revenue by delivering complete systems that deliver competitively differentiated system wide value.

We are progressing on all these fronts as evidenced through our incremental improvement in margin as well as through the continued growth of our product portfolio through successful solution launches in the quarter. An example of this is the expansion of our Prism Platform solution. In the quarter, we grew our integrated platform portfolio to include the 1.25 megawatt Equinox Prism Platform. To date, we have sold over 150 megawatts of the prism integrated solutions.

The 1.25 megawatt Equinox Prism Platform’s industry meeting 98% weighted CEC efficiency is combined with turnkey solution value removing costly system integration traditionally done in the field by delivering a complete and test medium voltage power conversion system straight from our SatCon Boston facility. This allows for a significant reduction in time and expensive system construction while ensuring the highest levels of system performance through a highly optimized design.

The strength of the North American market in the quarter is also evident by the successful development of many of the projects that were initiated last year. In 2010 Southern California Edison selected SatCon’s PowerGate Plus 500 Kilowatt as the primary building block for its 250 megawatt solar voltaic program. Since its launched we have delivered approximately 50 megawatts for our solutions for this project. In addition, these volumes when combined with multiple projects we have been awarded with additional California utilities, brings SatCon’s sales for utility owned solar power generation to over 100 megawatts in California alone.

Amongst these installations are some of the world’s most advanced and highest performing inverter technology platforms enabling the first truly dispatchable solar plans on the grid. An example of this is the Pacific Gas & Electric CalRENEW-1, the first utility scale photovoltaic solar project connected to the California Independent System Operator’s transmission grid under the state’s renewalable portfolio standards program. CalRENEW-1 leverages our Prism system complete with our proprietary advanced solar plant control capabilities in order to deliver to PG&A automatic voltage regulation and power factory control remotely while integrating the solar plant asset to the utility’s high voltage transmission line. These capabilities demonstrate the industry’s most advanced inverter functionality and are the technical lynch pins for scaling utility adoption of solar in to the future.

We also see positive indications in Asia with the adoption of the National Feed-in Tariff in China and growing government support in emerging markets in Taiwan, Thailand, and India. 2011 revenues in Asia Pacific have grown 143% year-over-year for the first three quarters. Although the slowdown in worldwide demand for solar has caused 2011 to perform below expectations we remain optimistic about the future and continue to expect the long term growth of our business to come from North America with increasing opportunity coming from Asia.

For the fourth quarter 2011 we expect revenues to be in the range of $37 to $42 million. We have identified the necessary measures that will enable the company to continue to compete successfully in our targeted regions and we believe we are on the path for sustainable growth and margin expansion. With that, I’ll turn the call over to our CFO Aaron Gomolak who will review our quarterly results and financial outlook.

Aaron M. Gomolak

As discussed, revenue for the third quarter ended September 30, 2011 was $45 million, relatively flat compared with the second quarter 2011 at $45.5 million and in line with the company’s guidance. During the quarter we sold 181 megawatts of our inverter solutions as compared to 195 megawatts in Q2 of this year. Our overall revenue per watt for Q3 2011 was $0.25 compared with Q2 2011 revenue per watt of $0.23 which reflects the industry’s adoption of our new integrated medium voltage prism platform solutions.

While the industry continues to experience pricing pressure, we believe we can maintain our competitive position in the large and utility scale inverter market through the introduction of these high efficiency and high performance solutions coupled with continued progress we make on reducing the cost of these products.

Net bookings for the third quarter of 2011 were $33.3 million including $1.6 million in service and extended warranty. This represents 128 megawatts of firm purchase orders for our products. Bookings for Q3 came mainly from North America. Our backlog, which consists of fixed purchase orders from our customers was $43.1 million as of September 30, 2011. Gross margin for the third quarter of 2011 was 12% compared with 8% in Q2 of 2011.

During the quarter $3.4 million of our Solstice Prism platforms were delivered at no margin relating to the accrued contract loss we took in Q2 of 2011. In addition, the company recorded a reduction in revenue of approximately $800,000 in a three party deal which resulted in the collection of a large receivable from a North American customer. These two events impacted Q3 gross margins by approximately 3%.

Our operating expenses for the quarter was $17.1 million compared to operating expenses of $23.8 million in the second quarter 2011 and include a $500,000 settlement for outstanding litigation with a customer. We reduced our operating expenses in the quarter through the restructuring initiative we announced on June 30th and a significant reduction in R&D spending coinciding with the launch of our prism platform products into volume manufacturing.

During the third quarter of 2011 the company recorded an operating loss of $11.8 million compared to an operating loss of $20.1 million in Q2 of 2011. Our net loss for the third quarter of 2011 was $12.1 million or -$0.11 per share compared with a net loss of $21.2 million or -$0.18 per share in the second quarter of 2011.

Now, turning to the balance sheet. We ended the quarter with $18.1 million in cash. Accounts receivable at the end of the third quarter were approximately $55.8 million down from $77.7 million last quarter. Of the $55.8 million quarter end accounts receivable balance, approximately $3 million represented pre-bills which we recognized as revenue in future periods as the product shipped to our customers.

Inventory at quarter end was $81.3 million down significantly from the $96.2 million in Q2 of this year. Last quarter we unveiled our 12 month strategy to implement a sustainable operating model. As indicated, our first corporate initiative was to manage and reduce the amount of working capital tied up on our balance sheet with an interim target to reduce inventory and AR to below the Q1 2011 ending levels by the end of this fiscal year. I am pleased to report that we are on track to achieve both of these targets by yearend.

Our second corporate initiative was to reduce the company’s breakeven levels with an initial goal of generating operating income in Q4 at revenue levels above $55 million. With the headwinds in the solar industry that Steve mentioned earlier, the company is embarking on another set of cost reduction initiatives to reduce our EBITDA breakeven to approximately $40 million by Q2 of 2012.

These three primary actions include, supply chain lead initiatives including price negotiations and localization of supply to lower cost regions. Design led cost reductions which include new product introductions such as the 1.25 megawatt 98% efficient Equinox Prism platform. As we mentioned earlier, year-to-date revenue in North America has increased 168% in the same time frame last year and this solution is becoming a larger percentage of our overall pipeline. As we optimize this design and source more subassemblies from Asia, this will decrease the cost significantly over the next two to three quarters on our Prism platform. Design led reductions also include engineering efforts in China to lower cost and improve quality on our existing products.

Lastly, a rebalance of our global footprint. This includes reducing the size of our internal expense structure and focusing Canada on the Ontario fit market capitalizing on our large Canadian pipeline.

For Q4 we expect revenue to be between $37 and $42 million. As we continue to burn through inventory and implement the cost reduction initiatives I just described, we expect gross margins to remain relatively flat on a revenue adjusted basis at 10% to 12%. These actions are necessary to align our cost structure to current revenue levels, improve our margins, and reach sustainable profitability.

That concludes our prepared remarks for today. With that, I will ask the operator to open up the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Colin Rush – Sync Equity.

Colin Rush – Sync Equity

Can you talk a little bit about how much you’re expecting to be able to squeeze out of the supply chain as you move forward and the timeframe for getting those cost savings?

Charles S. Rhoades

As we said, we’re working towards a goal of EBITDA breakeven at a $40 million run rate and having a below the line expense structure below $15 million for op ex. So that implies margins I think, in the low 20s at that revenue level. We think we can achieve that by Q2 this year. That’s a combination of both supply chain initiatives and design led cost reductions.

Aaron M. Gomolak

Just to add a little more color there, it’s really all three initiatives. So the supply chain led initiatives, the design led cost reductions, and kind of rationalizing and rebalancing our global footprint all have positive margin implications. I think we’ll be there by Q2.

Colin Rush – Sync Equity

Then ex the product shift can you talk about pricing trajectory, what you saw over the course of the last quarter and what you’re expecting over the next couple of quarters?

Charles S. Rhoades

Pricing this year overall from the beginning of the year on our larger inverters is down around 15%, 15% to 20% depending on particular deals. Pressure last quarter was probably a little bit less actually than we saw in the beginning of the year but overall for the year we’re in that 15% to 20% level. Now, we’ve seen a much higher percentage of our revenue come from platform solutions and so actually as we look at the revenue per watt we’re getting, we’ve grown revenue per watt every quarter of this year Q1, Q2 and Q3. So our strategy in moving to platforms and trying to get the cost down there, I think, is going to work relatively well.

We’ve got a lot of traction on that product so far. We sold over 150 megawatts of prism to date. It took the place where we’ve done the best, North America revenue was up for us substantially year-over-year and I think as we drive cost out of that solution, that’s going to be a winner for us going forward.

Colin Rush – Sync Equity

Just a final one on the balance sheet and your customer’s commentary around that, are you seeing any concerns with the balance sheet and the cash position as you work through these working capital issues with any of your customers? Are they giving you any push back on that? And if you could talk a little bit about how you start to unwind the line of credit and start paying that back over the next year or so?

Aaron M. Gomolak

I think it certainly is going to come as no surprise to you that our customers are stretching us a little bit but we’re having no significant bad debt related expenses right now. It’s natural in this phase of the cycle that we’re in that customers are going to stretch us a little bit but no collection issues that are going to result in bad debt or a write off looking forward. Then obviously, to answer the second part of your question, as we implement this $43 million breakeven model by Q2 next year and we start generating cash in the business, we will use part of those proceeds to pay down debt.

Operator

Your next question comes from Dale Pfau – Cantor Fitzgerald.

Dale Pfau – Cantor Fitzgerald

Several questions this morning, first could you talk a little bit about where you are with GCL-Poly? I know that’s pushed out a little bit, talk about that arrangement. Then I’ve got some follow ups.

Charles S. Rhoades

GCL has put their manufacturing facility on hold for the moment and so we’re not moving forward with manufacturing with GCL at this time. That remains a possibility open in the future. However, they continue to represent our products in China and are actually installing product both in Q3 and Q4 for our products in China right now. So that partnership remains a good partnership with us in China but it’s more of a sales and distribution partnership at the moment than manufacturing partnership.

Dale Pfau – Cantor Fitzgerald

As we look into Q4, some of the pundits have been expecting we would get a big pop here in Q4 domestically because of the expiration of the cash grant and meanwhile, we still have the normal seasonality in Q1. Could you talk a little bit about the dynamics you’re seeing in the market out there particularly in the US? What you’re customers are telling you not only for Q4 but for Q1 and Q2 next year?

Charles S. Rhoades

We’re having inquiries around securing the production tax credit for both Q4 and Q1 right now. We’re actually getting bookings for that right now. I’m sure you already know the rules there, if the customer’s order and take title to up to 5% of the projects before the end of the year, that product can still be delivered for revenue in the first quarter of next year. So we will see some buying across the quarter boundary to secure that tax credits for projects here in North America. So we are seeing some drive as we near the end of that particular tax credit within our own bookings and our own revenue.

Dale Pfau – Cantor Fitzgerald

But you’re also guiding to a flat to down quarter here, actually down quarter so what are the dynamics? Are you not seeing the typical strength in fourth quarter, some deferred buying?

Charles S. Rhoades

What we’re not seeing is I think North America is actually flat to up for us from Q3 to Q4 but we’re not seeing buying really at all right now for utility scale projects out of Europe so that has taken a piece off the top of our revenue for the quarter. But in North America I think we’re flat to slightly up in our projects from Q3 to Q4.

Dale Pfau – Cantor Fitzgerald

One last question, competitive dynamics have they changed? Have you seen anybody be more aggressive, less aggressive?

Charles S. Rhoades

I think it’s been the same players every quarter and we haven’t seen a lot of new entrants in the main regions that we serve. And as I answered to Colin earlier, pricing pressure in Q3 and Q4 was actually slightly less than we saw in the first half of the year.

Operator

Your next question comes from Jessie Pichel – Jefferies & Company.

Jessie Pichel – Jefferies & Company

What is your current factory utilization and what steps are you taking to reduce that capacity in light of the current environment?

Aaron M. Gomolak

Well, I think as you are aware, our main volume manufacturing facility is actually through a contract manufacturer. Our global capacity right now is sized at between 1.5 and 2 gigawatts and obviously running at a rate of something closer to 800 or 900 megawatts, we’re about 50% for the global system. As I alluded to in our set of cost reduction initiatives that we described part of our challenge in Q4 is really taking a hard look at our own internal cost structure and making sure that it’s sized appropriately for these somewhat lower revenue levels that we’re looking at for Q4.

Jessie Pichel – Jefferies & Company

It sounds like you have not decided to curtail your own capacity at this time?

Aaron M. Gomolak

We have a fairly large pipeline in Canada and right now the majority of the production coming out of our Canadian operations is for the Canadian market.

Charles S. Rhoades

We resized the Canadian facility pretty substantially in the second quarter Jessie, and I think that one is actually appropriately sized. What we’re doing out of the Boston facility right now is platform manufacturing and we’re pretty much full up on capacity. Boston is running almost flat out in terms of how many platforms we can build here. And our model has over 80% of our production coming out of the contract manufacturing facility so they need to manage their end of the business, and that doesn’t really show up in our cost structure.

Jessie Pichel – Jefferies & Company

You implemented a $40 million breakeven model and is that indicative of the type of revenue that you could expect if this downturn persists?

Charles S. Rhoades

We’re not projecting revenue into next year but we’re trying to be prudent about our cost structure in the face of an overall market that is challenging. One thing I do want to reiterate is in the two main markets where we see our growth coming next year, we’re actually up in both revenue and volume through the first three quarters of this year, pretty significantly. I think that’s where we’re going to maintain our focus, try to narrow up our engineering and our cost down work in those markets that are working well for us. But I do think that solar has some challenges as we look into the first half of next year and we want to be prepared for that.

Jessie Pichel – Jefferies & Company

I missed the first part of the call but are you seeing any channel stuffing year end here from some small market share inverter competitors that may not be compliant with some of the new regulations for inverters that begin next year?

Charles S. Rhoades

We may not be as close to that as other players since we’re working primarily in utility scale and large scale rooftop in our business. That may be going on but I’m not sure we’d be seeing a lot of it right now.

Operator

Your next question comes from Carter Driscoll – CapStone Investments.

Carter Driscoll – CapStone Investments

First question, can you talk about the booking trends during the third quarter and what you’ve seen during the third quarter and what you’ve seen through the first month of the fourth quarter? Did they decelerate, or accelerate, or was it fairly steady or linear through the quarter?

Charles S. Rhoades

Bookings were relatively flat through the quarter and have maintained that. We’re at a pretty good pace particularly here in North America here in the beginning of Q4.

Carter Driscoll – CapStone Investments

Can you talk about the activity outside of the California market and where, at least in the states, where you think the next kind of big wave of utility installations might occur? Obviously, you have the obvious players but are there any non-traditional markets in the states that you might see some pickup in 2012?

Charles S. Rhoades

I think it’s actually the traditional markets New Jersey and California with activity in other sunny states in the south, in Arizona, New Mexico where we’ve seen action. Actually, all of our regions in North America are performing pretty well, even the southeast which has not been a big player for us in the past is actually performing well for us right now. The North American market is good. The Asian market is pretty good. The European market for us is really weak and that’s where we’re seeing the drop in our top line revenue right now.

Carter Driscoll – CapStone Investments

Related to that in Europe, can you – I mean obviously we all know what’s going on with the sovereign debt crisis, is there something more than just hesitancy to commit to the project size from a financing perspective? Are people saying that if they get this straightened out maybe six to nine months from now you might see a big pick up? Can you characterize what’s going on?

Charles S. Rhoades

I think if you look in a couple of the markets where we thought we might do well this year, project finance is not really available in Italy right now, it’s not really available in Greece, so two markets where we thought we could see a lot of growth have been relatively slow. Greece has been the best market for us this year, surprisingly. We actually have a fantastic partner there in Survey Digital and they’ve closed some really good deals including deals for the coming quarter.

But I think overall the project finance environment is challenged in Europe. I also think the way the [fits] are structured it’s moving away from larger ground mount. Our product catalog in Europe is pretty much limited to ground mount projects or very large roofs. That end of the market has been more challenged than even the overall market in Europe this year.

Carter Driscoll – CapStone Investments

My last question is can you talk about component lead times? I think last quarter you talked about 12 to 14 weeks of platforms, has that changed at all or is that at all part of strategy if there is some slack supply whether that could help with your cost reduction initiatives?

Charles S. Rhoades

In terms of lead times we’re at eight to 12 weeks on our standard inverters, we’re at 12 to 14 weeks on our platform products. I mean, that hasn’t changed actually quarter-over-quarter. We are going to talk a very, very hard look at our overall cost structure as we look at achieving an EBITDA breakeven at $40 million by Q2. We’re going to be looking at all of our opportunities to make sure we’re in good shape as we look at the first half of next year.

Operator

Your next question comes from Joseph A. Maxa – Dougherty & Company.

Joseph A. Maxa – Dougherty & Company

Aaron did you suggest or say earlier that you thought you’d be at a 20% gross margin by Q2?

Aaron M. Gomolak

We actually didn’t give any specific guidance on gross margin Joe. I think we’re looking at this holistically and we’re looking at opportunities to reduce and pull out costs whether it’s in materials, G&A, R&D, so I don’t think we’ve gotten to the point yet where we can give you a target for GM in Q2. Just know that we’re working on our overall cost structure to get us to a point where we will be EBITDA breakeven.

Joseph A. Maxa – Dougherty & Company

I’m just looking at those numbers and 20% to 25% gross margin, anywhere in that range it certainly suggests your op ex have to come down dramatically to $10 million or something. Is that realistic?

Aaron M. Gomolak

I think if you kind of took the higher end of that range and look at a 25% gross margin at a $40 million business you’d have $10 million in margin. As you know, we have about $2 million of non-cash related expenses in terms of depreciation FASM 23, etc.

Joseph A. Maxa – Dougherty & Company

So maybe not quite as dramatic but still quite a long way to go?

Aaron M. Gomolak

We do have a long way to go correct.

Joseph A. Maxa – Dougherty & Company

You previously expected mid-teens in Q3 gross margin and I believe that included the impact with the non-margin business so what happened beside that that dropped it down to the 12%?

Aaron M. Gomolak

I think Joe, first of all we came in at the very low end of our revenue guidance obviously which puts gross margins at the very low end of the mid-teens. The issue I described in my script around we took an $800,000 reduction of revenue to settle an outstanding receivable through a three party deal. It was really we had to evaluate the accounting literature, we looked at treating that as a bad debt expense versus a reduction in revenue but management and our auditors concurred that this was the proper way to handle it so that dropped out about two full points of gross margin.

Joseph A. Maxa – Dougherty & Company

Lastly, do you see GCL picking up other inverter suppliers that would maybe squeeze in some of your potential with them?

Charles S. Rhoades

You’d have to ask them about that. That hasn’t been something that we’ve seen so far.

Operator

Your next question comes from Adam Krop – Ardour Capital Investments.

Adam Krop – Ardour Capital Investments

Just looking for some high level comments on 2012 maybe around market share. I mean right now it looks like you’re about 30% to 35% market share in the US. Do you guys have a target for 2012? Just some comments on a high level in terms of demand would be helpful.

Charles S. Rhoades

We’re looking to maintain that share in the mid-30s in the North American market. I think we entered the year at about that. It looks like we’re continuing to perform at that level, winning more than we lose here as we go into a lot of these big deals. I think that’s a good target for us. We’re looking for the US market to be flat to up somewhat next year so I think that implies some revenue growth in North America.

I think in Asia we’ve got a real good chance to grow. In many of the markets we’re gaining traction China, Taiwan, India. We’ve had some early forays, no bookings yet into Thailand but it looks like it could be an interesting opportunity for us going forward. I think in terms of world share, it kind of depends on what happens to the European market, where that gets sized next year. But in the two main regions that we’re focused on in North America and Asia I think we can see growth as we look at 2012.

Adam Krop – Ardour Capital Investments

Then just to help me understand, it seems like there’s a lot of utility scale projects going forward here in the US. Can you just help me understand the dynamics between that and when you should start to see some increased order flow for you guys? What are kind of the disconnects there?

Charles S. Rhoades

Well, as we said earlier in the call, the market that is working the best for us right now is North America. We are seeing good order flow in North America. We grew in terms of our megawatts for the year up 168% through the first three quarters of the year. So they’ve got big projects, we did 50 megawatts with [inaudible] Canada over the last 12 months, we did 30 megawatts with them in California. We’ve had some pretty good utility bookings over the last two quarters. I think we’ve not seen major announcements from any of the big inverter players right now. For the big parts, most of the activity has been in that 10 to 30 megawatt range with the utility scale projects.

Operator

Your next question comes from Al Shams – MidSouth Capital.

Al Shams – MidSouth Capital

This may have been touched on briefly before but I’d like to go over it again. I joined the call a little bit late. Do we have the financial integrity to continue to finance these losses? And, do we have any near term debt coming due?

Aaron M. Gomolak

We have a subordinated debt and a convertible note that we pay monthly principal and interest on right now and that’s really part of the focus for Steve and for myself, making sure that we bring the breakeven level of this company down so that we are EBITDA positive at revenue levels of $40 million by Q2. That’s certainly the sole focus on myself right now and in that scenario we certainly have adequate cash although it’s still tied up on our balance sheet in terms of inventory and accounts receivable. But we made significant progress the last three months at reducing both the numbers. Both AR and inventory will continue to track downward pretty rapidly as we look over the next two to three quarters. That’s really our biggest source of cash as we look out the next two or three quarters.

Al Shams – MidSouth Capital

What do you think you can generate in cash out of bringing those two balance sheet items down?

Aaron M. Gomolak

We laid out some interim targets for the end of the year which would have those numbers coming down by another $10 to $12 million this quarter. I think a number like that for Q1 and Q2 is certainly reasonable to model.

Al Shams – MidSouth Capital

Do we run the risk of any violations of covenants or indentures or anything of that nature?

Aaron M. Gomolak

No. We have a very strong relationship with our bank. I have meetings with them every two weeks. We have no covenant concerns at this point.

Al Shams – MidSouth Capital

Do you have any backup lines of credit with banks where we can draw on if we needed to?

Aaron M. Gomolak

We’re typically not fully drawn on our primary line of credit as we look throughout the quarter. So we do have funds available if need be.

Operator

It appears we have reached the end of our Q&A program. I would now like to turn the floor back to management for closing comments.

Charles S. Rhoades

Thank you everyone. This concludes today’s call. We look forward to speaking with you on our fourth quarter conference call early next year. Thanks a lot.

Operator

This concludes today’s teleconference. You may now disconnect you lines at this time. Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: SatCon's CEO Discusses Q3 2011 - Earnings Call Transcript
This Transcript
All Transcripts