Question:

As revenue is anticipated by management to increase in Fiscal 2012, which applications do you see as contributing most to the increase going forward? Thanks.

Answer from Capstone Management:

The Oil, Gas and other Natural Resources segment of our business is growing the fastest with new orders coming from the U.S. shale gas market and the Russian associated gas market.

Question:

As a follower of your company and an investor in your stock, I love what you're doing! I have a question, however, for which I haven't been able to find the answer. Are your ambitions getting ahead of your production capabilities? Do you have expansion plans? I'd sure appreciate a reply! Thanks.

Answer from Capstone Management:

Capstone has increased quarterly revenues from approximately $5 million a quarter to well over $20 million a quarter without significant additional equipment or expansions to its manufacturing plant. In fact, Capstone has fewer production employees today than it did four years ago. Even with this dramatic increase in annual production rates Capstone is still operating a single shift of labor five days a week for the majority of the time.

Question:

Why don't you invite President Obama to one of your plants? He is an environmentalist and would enjoy Capstone's product line relative to its environmental benefits. It would be a huge public relations event.

Answer from Capstone Management:

Capstone has previously and will continue to invite local, state and federal politicians to visit Capstone and learn about its innovative clean and efficient microturbine technology. Capstone will continue to stay in contact with the President’s staff and make the White House aware of our efforts to provide new jobs nationally in the clean energy field and to help the President increase U.S. exports.

Question:

Has Capstone Turbine considered developing turbine generator to power a locomotive engine?

Answer from Capstone Management:

Capstone is not currently planning on developing a product for the locomotive market. The Company currently has four major product development efforts underway in the electric vehicle, agricultural, syngas and solar markets. In addition, Capstone is in the process of upgrading the C200 product to a C250, which will produce an additional 50kW of power. In addition to utilizing the C250 in its own right, Capstone also will be able to combine the C250 with an additional engine spool to create a high efficiency 370kW product, the C370. 

Question:

It seems the key thing to better financial performance is improving margins. What is Capstone specifically doing to address that?

Answer from Capstone Management:

Capstone is in the process of reducing the direct material cost of its microturbine products by approximately 30%. This cost reduction plan is a combination of leveraging higher manufacturing volumes, changes in manufacturing techniques, and outsourcing to new, lower-cost international suppliers.

In addition, Capstone has passed on three product price increases to its distribution partners in the last two years. The sum of the product price increases totals 21%. The product price increases are in the process of flowing through our backlog. Management anticipates that the Company will substantially complete the 30% cost reduction and realize the majority of the price increases by the third to fourth quarter of Fiscal 2012.