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FuelCell Energy Reports Third Quarter Results and Business Highlights



FuelCell Energy Reports Third Quarter Results and Business Highlights

  * Record quarterly revenue of $54 million
  * Record gross margin
  * Marketing agreement with NRG Energy, including power purchase agreement
    model
  * Construction of multi-megawatt fuel cell parks on track in Connecticut and
    South Korea

DANBURY, Conn., Sept. 4, 2013 (GLOBE NEWSWIRE) -- FuelCell Energy, Inc.
(Nasdaq:FCEL), a global leader in the design, manufacture, operation and
service of ultra-clean, efficient and reliable fuel cell power plants, today
reported results for its third quarter ended July 31, 2013 along with an
update on key business highlights.

Financial Results

FuelCell Energy (the Company) reported total revenues for the third quarter of
2013 of $53.7 million compared to $29.7 million for the third quarter of 2012,
an increase of 81 percent.

Product sales for the third quarter of 2013 totaled $45.4 million including
$39.4 million of power plant revenue and fuel cell kit sales, and $6.0 million
of power plant component sales and installation services. For the comparable
prior year period, product sales totaled $21.0 million including $17.8 million
of power plant revenues and fuel cell kit sales and $3.2 million of power
plant component sales and installation services.

Service and license revenues for the third quarter of 2013 totaled $3.7
million compared to $6.5 million for the comparable prior year period. Service
revenue from scheduled module exchanges is recognized at the time of the
module exchange whereas the remaining portion of service revenue from long
term service agreements is recognized ratably over the life of the service
contract. Service revenue declined year-over-year as there were no scheduled
module exchanges under long term service agreements in the third quarter of
2013 compared to approximately $3.0 million of service revenue recognized in
third quarter of 2012 from module exchange actions. Service revenue is
expected to trend higher in subsequent quarters along with the growing
installed base, including for example, service revenue for the Bridgeport fuel
cell park that is expected to begin being recognized in calendar year 2013
once the park is commissioned.

Advanced technologies contract revenue was $4.6 million for the third quarter
of 2013 compared to $2.1 million for the third quarter of 2012 with the
increase primarily due to solid oxide fuel cell development programs,
particularly the unmanned aerial program with Boeing included from the
acquisition of Versa Power Systems in the first quarter of 2013.

Backlog totaled $380.8 million at July 31, 2013 compared to $172.0 million at
July 31, 2012.

  * Product sales backlog was $199.6 million at July 31, 2013 compared to
    $75.7 million at July 31, 2012 with the year-over-year increase due to the
    fuel cell kit order by POSCO Energy announced in October 2012 and the
    Bridgeport fuel cell park project announced in December 2012. Product
    backlog in megawatts totaled 123.0 MW at July 31, 2013 compared to 42.9 MW
    at July 31, 2012.
  * Service backlog was $163.0 million at July 31, 2013 compared to $82.5
    million at July 31, 2012. The service contract for the Bridgeport fuel
    cell park project accounted for a significant portion of the growth
    year-over-year.
  * Advanced technologies contracts backlog was $18.2 million at July 31, 2013
    compared to $13.8 million at July 31, 2012.

The gross profit generated in the third quarter of 2013 totaled $4.5 million
compared to a gross loss of $2.7 million incurred in the third quarter of
2012. The record third quarter 2013 gross margin of 8.4 percent was driven by
improved overhead absorption from higher production levels combined with a
sales mix that included power plants along with fuel cell kits.

Loss from operations for the third quarter of 2013 was $4.6 million compared
to $10.5 million for the third quarter of 2012. Execution of strategic
initiatives including expenditures to develop the European market for fuel
cell power plants and expand market opportunities for fuel cell solutions
including commercializing solid oxide fuel cell technology resulted in the
increase in operating expenses in the third quarter of 2013 compared to the
third quarter of 2012.

Net loss attributable to common shareholders for the third quarter of 2013
totaled $6.4 million, or $0.03 per basic and diluted share, compared to $10.7
million or $0.06 per basic and diluted share in the third quarter of 2012.

Year-to-Date 2013

For the nine months ended July 31, 2013, the Company reported revenue of
$132.5 million compared to $85.2 million for the prior year period. Product
sales were $108.9 million compared to $65.9 million for the prior year period.
Service agreement and license revenues were $12.8 million compared to $13.4
million for the prior year period. Advanced technologies contract revenues
totaled $10.8 million, compared to $5.9 million for the prior year period.

For the nine months ended July 31, 2013, gross profit was $4.5 million
compared to a gross loss of $0.4 million for the nine months ended July 31,
2012. The gross margin for the current period was 3.4 percent.  A charge of
approximately $2.1 million was incurred in the first quarter of 2013 related
to a select number of fuel cell modules requiring repair, which negatively
impacted financial results for the nine months ended July 31, 2013 compared to
the prior year period.

Loss from operations for the nine months ended July 31, 2013 was $22.9
million, compared to $23.7 million for the nine months ended July 31,
2012. The year-over-year change in operating expenses includes increased
business development expenditures for the North American and European markets
and consolidating Versa Power Systems after its acquisition by the Company. As
a percentage of sales, total operating expenses decreased from 27.3 percent
for the nine months ended July 31, 2012 to 20.6 percent for the nine months
ended July 31, 2013 from the leverage of existing sales and services
infrastructure that supports higher revenue levels.

Net loss attributable to common shareholders for the nine months ended July
31, 2013 was $27.1 million or $0.14 per basic and diluted share, compared to
$26.6 million or $0.17 per basic and diluted share for the prior year
period.   

Cash and cash equivalents

Cash and cash equivalents plus restricted cash totaled $91.4 million at July
31, 2013.  Total cash on the balance sheet increased by $19.7 million, which
includes net proceeds of $35.5 million from the issuance of convertible notes
during the quarter, off-set by cash used in operating activities of $14.0
million and capital expenditures of $1.5 million and preferred dividend
payments and other net activity totaling $1.3 million. Depreciation expense
for the quarter was $1.0 million.  

On June 20, 2013, the Company issued $38.0 million principal amount of 8.00%
Senior Unsecured Convertible Notes ("Notes") due June 15, 2018.  Interest is
payable semi-annually in arrears, beginning December 15, 2013.  The Notes are
convertible into shares of the Company's common stock at a conversion rate of
645.1613 shares of common stock per $1,000 principal amount of convertible
notes, equivalent to a conversion price of approximately $1.55 per share of
common stock. The net proceeds were approximately $35.5 million, after
deducting underwriting discounts, commissions and offering expenses.

Business Highlights and Strategy Execution

Operations update

"Our margins are expanding from higher production levels as fixed costs are
absorbed by the greater sales volume and cost reductions flow through the
financial statements," said Chip Bottone, President and Chief Executive
Officer, FuelCell Energy, Inc. 

After increasing the production level during the second quarter of 2013, the
Company maintained an annual production run-rate at the Torrington,
Connecticut production facility of 70.8 megawatts (MW) during the third
quarter of 2013, producing 17.7 MW of fuel cell components for fuel cell kits
and fuel cell power plants.     

FuelCell Energy Solutions GmbH announced a milestone during the third quarter
of 2013 with the completion of the first fuel cell stack at the German
manufacturing facility. The stack is part of the power plant being installed
in Berlin, Germany for a Federal Ministry office complex, reinforcing the
localization aspect of the business model that enables local job creation to
support local demand. 

Commissioning has started at the 14.9 MW Bridgeport fuel cell park for two of
the five power plants. Power production is beginning in stages during the
testing and commissioning period. The inter-connection work to connect the
fuel cell park to the electric grid via three existing substations is ahead of
schedule and the fuel cell park remains on schedule to deliver full power by
the end of calendar year 2013. 

The 59 MW fuel cell park in Hwasung City, South Korea that is under
construction by POSCO Energy, has begun producing power as individual power
plants are commissioned in stages. The site is currently generating
approximately 29 MW of ultra-clean power for the electric grid and heat for a
district heating system. The fuel cell park is expected to be at full power by
the end of 2013 or early 2014.

Market Update

"The co-marketing agreement announcement with NRG Energy, the largest
independent power producer in North America, leverages our resources and is
expected to lead to meaningful order flow," said Mr. Bottone. "The agreement
includes a power purchase agreement model for customers that prefer a
pay-as-you-go option whereby NRG Energy will own the power plant and sell the
ultra-clean power and high quality heat to the customer."

The Co-Marketing Agreement with NRG Energy (NYSE:NRG) adds an important new
sales channel for the marketing and sale of FuelCell Energy power plants. NRG
will market the power plants to its customer base and FuelCell Energy is
expected to install, operate and maintain each power plant.

Cautionary Language 

This news release contains forward-looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, including, without limitation, statements with respect to the Company's
anticipated financial results and statements regarding the Company's plans and
expectations regarding the continuing development, commercialization and
financing of its fuel cell technology and business plans. All forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Factors that could cause
such a difference include, without limitation, changes to projected deliveries
and order flow, changes to production rate and product costs, general risks
associated with product development, manufacturing, changes in the regulatory
environment, customer strategies, unanticipated manufacturing issues that
impact power plant performance, changes in critical accounting
policies, potential volatility of energy prices, rapid technological change,
competition, and the Company's ability to achieve its sales plans and cost
reduction targets, as well as other risks set forth in the Company's filings
with the Securities and Exchange Commission. The forward-looking statements
contained herein speak only as of the date of this press release. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any such statement to reflect any change in the
Company's expectations or any change in events, conditions or circumstances on
which any such statement is based.

About FuelCell Energy

Direct FuelCell® power plants are generating ultra-clean, efficient and
reliable power at more than 50 locations worldwide.  With more than 300
megawatts of power generation capacity installed or in backlog, FuelCell
Energy is a global leader in providing ultra-clean baseload distributed
generation to utilities, industrial operations, universities, municipal water
treatment facilities, government installations and other customers around the
world.  The Company's power plants have generated more than 1.7 billion
kilowatt hours of ultra-clean power using a variety of fuels including
renewable biogas from wastewater treatment and food processing, as well as
clean natural gas.  For more information, please visit www.fuelcellenergy.com

See us on YouTube

Direct FuelCell, DFC, DFC/T, DFC-H2 and FuelCell Energy, Inc. are all
registered trademarks of FuelCell Energy, Inc.  DFC-ERG is a registered
trademark jointly owned by Enbridge, Inc. and FuelCell Energy, Inc.

Conference Call Information

FuelCell Energy management will host a conference call with investors
beginning at 10:00 a.m. Eastern Time on September 5, 2013 to discuss the third
quarter 2013 results.  An accompanying slide presentation for the earnings
call will be available at http://fcel.client.shareholder.com/events.cfm
immediately prior to the
call.                                                                  

Participants can access the live call via webcast on the Company website or by
telephone as follows:

  * The live webcast of this call will be available on the Company website at
    www.fuelcellenergy.com. To listen to the call, select 'Investors' on the
    home page, then click on 'events & presentations' and then click on
    'Listen to the webcast'
  * Alternatively, participants in the U.S. or Canada can dial 877-303-7005
  * Outside the U.S. and Canada, please call 678-809-1045
  * The passcode is 'FuelCell Energy'

The webcast of the conference call will be available on the Company's
Investors' page at www.fuelcellenergy.com. Alternatively, the replay of the
conference call will be available approximately two hours after the conclusion
of the call until midnight Eastern Time on September 9, 2013:

  * From the U.S. and Canada please dial 855-859-2056
  * Outside the U.S. or Canada please call 404-537-3406
  * Enter confirmation code 34803853

 
FUELCELL ENERGY, INC.
Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands, except share and per share amounts)
 
                                                         July 31,  October 31,
                                                         2013      2012
ASSETS                                                              
Current assets:                                                     
Cash and cash equivalents - unrestricted                 $ 81,359  $ 46,879
Restricted cash and cash equivalents – short-term        5,053     5,335
License fee receivable                                   --        10,000
Accounts receivable, net                                 40,350    25,984
Inventories, net                                         47,233    47,701
Other current assets                                     8,282     4,727
Total current assets                                     182,277   140,626
                                                                    
Restricted cash and cash equivalents – long-term         4,950     5,300
Property, plant and equipment, net                       22,466    23,258
Goodwill                                                 4,055     --
Intangible assets                                        9,592     --
Investment in and loans to affiliate                     --        6,115
Other assets, net                                        14,377    16,186
Total assets                                             $ 237,717 $ 191,485
                                                                    
LIABILITIES AND EQUITY                                              
Current liabilities:                                                
Current portion of long-term debt                        $ 4,403   $ 5,161
Accounts payable                                         21,952    12,254
Accounts payable due to affiliate                        --        203
Accrued liabilities                                      19,398    20,265
Deferred revenue                                         55,846    45,939
Preferred stock obligation of subsidiary                 1,046     1,075
Total current liabilities                                102,645   84,897
                                                                    
Long-term deferred revenue                               20,443    15,533
Long-term preferred stock obligation of subsidiary       13,310    13,095
Long-term debt and other liabilities                     50,036    3,975
Total liabilities                                        186,434   117,500
Redeemable preferred stock (liquidation preference of    59,857    59,857
$64,020 at July 31, 2013 and October 31, 2012)
Total (deficit) equity:                                             
Shareholders' (deficit) equity                                      
Common stock ($.0001 par value; 275,000,000 shares
authorized; 192,054,464 and 185,856,123 shares issued    19        18
and outstanding at July 31, 2013 and October 31, 2012,
respectively)
Additional paid-in capital                               753,300   751,256
Accumulated deficit                                      (761,489) (736,831)
Accumulated other comprehensive income                   79        66
Treasury stock, Common, at cost (5,679 shares at July               
31, 2013 and October 31, 2012)                           (53)      (53)
Deferred compensation                                     53       53
Total shareholders' (deficit) equity                     (8,091)   14,509
 Noncontrolling interest in subsidiaries                 (483)     (381)
Total (deficit) equity                                   (8,574)   14,128
Total liabilities and equity                             $ 237,717 $ 191,485

 
FUELCELL ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in thousands, except share and per share amounts)
 
                                                 Three Months Ended
                                                 July 31,
                                                 2013        2012
Revenues:                                                     
Product sales                                    $ 45,441    $ 21,023
Service agreement and license revenues           3,706       6,546
Advanced technologies contract revenues          4,560       2,124
Total revenues                                   53,707      29,693
                                                              
Costs of revenues:                                            
Cost of product sales                            41,523      22,433
Cost of service agreement revenues               3,427       7,888
Cost of advanced technologies contract revenues  4,235       2,110
Total cost of revenues                           49,185      32,431
                                                              
Gross profit (loss)                              4,522       (2,738)
                                                              
Operating expenses:                                           
Administrative and selling expenses              5,203       4,580
Research and development expenses                3,913       3,193
Total operating expenses                         9,116       7,773
                                                              
Loss from operations                             (4,594)     (10,511)
                                                              
Interest expense                                 (1,078)     (544)
Loss from equity investment                      --          (42)
License fee and royalty income                   --          422
Other income (expense), net                      (162)       656
                                                              
Loss before benefit for income taxes             (5,834)     (10,019)
                                                              
Benefit for income taxes                         20          9
                                                              
Net loss                                         (5,814)     (10,010)
                                                              
Net loss attributable to noncontrolling interest 202         88
                                                              
Net loss attributable to FuelCell Energy, Inc.   (5,612)     (9,922)
                                                              
Preferred stock dividends                        (800)       (800)
                                                              
Net loss attributable to common shareholders     $ (6,412)   $ (10,722)
                                                              
Loss per share basic and diluted                              
Basic                                            $ (0.03)    $ (0.06)
Diluted                                          $ (0.03)    $ (0.06)
                                                              
Weighted average shares outstanding                           
Basic                                            192,051,578  185,906,834
Diluted                                          192,051,578  185,906,834

 
 
FUELCELL ENERGY, INC.
Consolidated Statements of Operations
(unaudited)
(Amounts in thousands, except share and per share amounts)
 
                                                 Nine Months Ended
                                                 July 31,
                                                 2013        2012
                                                              
Revenues:                                                     
Product sales                                    $ 108,881   $ 65,882
Service agreement and license revenues           12,783      13,398
Advanced technologies contract revenues          10,837      5,903
Total revenues                                   132,501     85,183
                                                              
Costs of revenues:                                            
Cost of product sales                            103,950     63,932
Cost of service agreement revenues               13,816      16,130
Cost of advanced technologies contract revenues  10,210      5,554
Total cost of revenues                           127,976     85,616
                                                              
Gross profit (loss)                              4,525       (433)
                                                              
Operating expenses:                                           
Administrative and selling expenses              16,071      12,346
Research and development expenses                11,315      10,932
Total operating expenses                         27,386      23,278
                                                              
Loss from operations                             (22,861)    (23,711)
                                                              
Interest expense                                 (2,218)     (1,749)
Income (loss) from equity investment             46          (554)
License fee and royalty income                   --          1,258
Other income (expense), net                      (267)       438
                                                              
Loss before provision for income taxes           (25,300)    (24,318)
                                                              
Provision for income taxes                        (22)       (69)
                                                              
Net loss                                         (25,322)    (24,387)
                                                              
Net loss attributable to noncontrolling interest 664         230
                                                              
Net loss attributable to FuelCell Energy, Inc.   (24,658)    (24,157)
                                                              
Preferred stock dividends                        (2,400)     (2,401)
                                                              
Net loss attributable to common shareholders     $ (27,058)  $ (26,558)
                                                              
Loss per share basic and diluted                              
Basic                                            $  (0.14)   $  (0.17)
Diluted                                          $  (0.14)   $  (0.17)
                                                              
Weighted average shares outstanding                           
Basic                                            190,006,331  158,548,998
Diluted                                          190,006,331  158,548,998

CONTACT: FuelCell Energy, Inc.
         Kurt Goddard, Vice President Investor Relations
         203-830-7494
         ir@fce.com

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