Capstone Turbine Corporation (NASDAQ:CPST), responding to the global coronavirus (COVID-19) pandemic, has updated its Business Continuity Plan designed to keep employees safe and to support the company’s financial goals in the June quarter.
Under the plan, Capstone’s leadership team volunteered to take a 25% temporary salary cut, as well as the fiscal 2020 Executive Bonus in equity in lieu of cash, if earned. Additionally, 28 other top managers have volunteered to take a similar 15% reduction in salary.
The maker of clean-energy microturbines announced that those voluntary employee salary cuts will be extended from June 30 to September 28.
In a statement, Capstone CEO Darren Jamison said the plan also allows the company to continue to support its critical aftermarket Factory Protection Plan (FPP) long-term service contracts and spare parts deliveries to Essential Critical Infrastructure Customers, such as energy, health care, wastewater treatment, pharmaceuticals, and food manufacturing.
He said the plan could help management achieve the goal of reaching positive Adjusted EBITDA in its first quarter of fiscal year 2021.
Beginning March 30, Capstone furloughed about 52 employees, leaving behind only staff deemed essential for day-to-day administrative operations for a minimum period of 45 days.
Capstone said several employees will now return to work June 1, most with the same 15% voluntary salary cuts, with others scheduled to return in a staggered manner to the end of September.
However, as a result of the continued global economic slowdown due to COVID-19 and the associated decline in global crude oil prices, the company said it will be eliminating the positions of 26 employees on June 1.
Limited production capability
Capstone continues to have a limited production capability for new microturbine products, but had recently pre-built approximately 5.9 megawatts (MW) of microturbine finished goods during March for shipment during this period of suspended production. The company said it shipped 18 microturbines for approximately 1.2 MW during April.
It also continues to maintain a crew of essential operations employees to manufacture service engines, remanufacture spare parts and provide service spares in support of FPPs and global distributor spare parts orders. In March, Capstone also pre-built and shipped over $1.2 million of critical service parts to its global distributors to ensure continued operations of its microturbine fleets.
Capstone said its critical vendor supply chain, although affected by the pandemic, continues to be operational as of today.
But the company said it is looking to minimize incoming inventory receipts to less than $6 million between April 1 and June 30 in order to minimize cash burn, increase liquidity, and increase inventory turns with the goal of generating positive working capital during the quarter.
Capstone, based in Van Nuys, California, offers a product line-up of microturbines that can produce anywhere from 30 kilowatts to 10 megawatts of power, operating on a variety of gaseous or liquid fuels. To date, Capstone has shipped over 9,000 units to 73 countries.
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