Good post Bill but it makes me want to puke. Not much happy talk from either Capstone nor the Analyst. As long as we have Carrier UTC Power Systems sitting like a vulture on a tombstone they are taking a nice chunk of our revenue. On a not so distant 10Q the following statement was made "Royalty expense increased $0.4 million during the three months ended December 31, 2011 compared to the three months ended December 31, 2010. The increase in our royalty expense is the result of sales growth of our C200 and C1000 Series systems. We pay Carrier Corporation an ongoing royalty of a predetermined fixed rate for each microturbine system covered by the Development and License Agreement.
One Analyst asked about the ongoing warranty issue and the answer was less than clear. On the same 10Q filed on 9 Feb 2012 the issue of warranties was stated thusly: "Warranty expense is a combination of a standard warranty provision recorded at the time revenue is recognized and changes, if any, in estimates for reliability repair programs. Reliability repair programs are estimates that are recorded in the period that new information becomes available, including design changes, cost of repair and product enhancements, which can include both in-warranty and out-of-warranty systems. The increase in warranty expense of $0.4 million reflects an increase in the standard warranty provision, an increase in warranty claims related primarily to early production C200 and C1000 Series systems and more units under warranty during the three months ended December 31, 2011 compared to the prior year period."
Warranties are definitely something that have to be addressed especially on a product being touted as having a 99% uptime. No "color" was given on this cash eating machine. We should hope that any new units going out the door are fully upgraded.
All and all, in my opinon, this was one of the lowest beat CCs I've listened to in several years. The only repretition from one of the analyst was the usual "is this due to lumpiness" in some area. I'll read the transcript later lest I offer an opinion rather than fact.
We all surely hope that the California market will continue to grow as well as those in S. America and Russia. DJs comment about the use of Capstone domestically are mainly in the liquids area isn't surprising as the rig industry has moved from natural gas to liquids due to glut of NG on the market. Hopefully his sense that the downturn in rig count won't ding us so much.
I suppose the tale will be told tomorrow although knocking on a buck AHs didn't leave me with a warm and fuzzy feeling.
