Master Energy Services Agreement with Starwood Hotels & Resorts in California
Added $99 Million from Equity Offering
Alliance with POSCO Opens Up Korean Market
DANBURY, Conn., March 7 /PRNewswire-FirstCall/ -- FuelCell Energy, Inc.
(Nasdaq: FCEL) (the Company), a leading manufacturer of stationary fuel cell
power plants for commercial and industrial customers, today reported results
and accomplishments for the first quarter of fiscal year 2005.
Financial Results
FuelCell Energy reported a net loss to common shareholders for the first
quarter of fiscal 2005 of $19.4 million, or $0.40 per basic and diluted share.
The reported net loss includes the following items:
* accrued preferred dividends totaling $1.3 million, or $0.03 per basic
and diluted share;
* a loss from discontinued operations totaling $1.3 million ($0.03 per
basic and diluted share) related to exiting certain Canadian
facilities; and,
* a $0.9 million ($0.02 per basic and diluted share) asset impairment
charge to continuing operations for a planned manufacturing process
change expected to result in future uprated product performance and
cost reductions.
For comparison purposes, the Company reported a net loss of $28.1
million, or $0.59 per basic and diluted share, during the same quarter
of the previous year. First quarter 2004 Adjusted Net Loss, which excludes a
one-time charge for purchased in-process research and development, was $15.9
million or $0.34 per basic and diluted share.
Cash, cash equivalents and investments (U.S. Treasuries) on hand as of
January 31, 2005 totaled $231.4 million, an increase of $79.0 million over
$152.4 million of cash, cash equivalents and investments (U.S. Treasuries)
reported at October 31, 2004. During the first quarter of fiscal 2005, the
Company received net proceeds of $99.0 million from its sale of Series B
Perpetual Convertible Preferred Stock, which was offset by $20.0 million cash
used during the three months ended January 31, 2005. Cash consumption during
the quarter included $2.8 million for equipment being built for power purchase
agreements, $0.5 million for other capital expenditures, and $1.0 million for
severance and other consolidation activities related to its former Canadian
solid oxide fuel cell (SOFC) operations. Concurrent with the start-up of the
two DFC300A power plants for the Santa Barbara power purchase agreement, the
Company has applied for approximately $2.7 million in incentive funding from
the California Self Generation Incentive Program and the Department of Defense
Climate Change Fuel Cell Program.
FuelCell Energy's consolidated revenue for the first quarter of fiscal
2005 was $7.6 million compared to $7.4 million for the first quarter of fiscal
2004. Components of revenue and costs were as follows:
* Fuel cell product sales were $5.0 million for the first quarter of
fiscal 2005 compared to $2.0 million in the same period of a year ago.
The increase in product sales and revenues and costs of product sales
and revenues was due primarily to the manufacture of power plants for
Marubeni and Chevron Energy Solutions customers as well as DFC cell
component shipments for MTU. Cost of product sales and revenues were
$13.7 million and $7.6 million in the quarters ended January 31, 2005
and 2004, respectively. The ratio of costs to product sales improved
from the same quarter of a year ago as the Company recognized savings
related to its cost out program. The Company's product backlog totaled
approximately $22.9 million, up from $16.3 million on the same date a
year ago. Included in these figures are $1.4 million and $0.7 million,
respectively, related to long-term service agreements.
* Research and development contract revenue for the first quarter of
fiscal 2005 was $2.5 million compared to $5.4 million in the same
period of a year ago. Research and development contract revenues and
costs declined with the completion of the U.S. Department of Energy's
(DOE's) Product Design Improvement and Bath Iron Works contracts, and
lower revenues on the Clean Coal and U.S. Navy contracts. Costs of
research and development contract revenue were approximately $2.8
million and $7.5 million in the quarters ended January 31, 2005 and
2004, respectively. Research and development contract revenue and
costs were primarily related to SOFC development under the DOE's Solid
State Energy Conversion Alliance Program, the combined cycle Direct
FuelCell/Turbine(R) development under DOE's Vision 21 program, and the
Ship Service Fuel Cell contract with the U.S. Navy. The ratio of
research and development cost to revenue improved over the same quarter
a year ago due to the current mix of cost share contracts. As of
January 31, 2005, the Company's research and development sales backlog
totaled approximately $24.7 million of which Congress has authorized
funding of $14.4 million. This compares to research and development
sales backlog totaling $25.7 million ($14.8 million funded) as of
January 31, 2004.
Administrative and selling expenses were approximately $3.1 million for
the quarter compared to $3.7 million in the same period of the prior year.
Research and development expenses for the quarter were $5.2 million compared
to $5.9 million recorded in the same period of the prior year. These
decreases were primarily due to the transfer of the Company's Canadian SOFC
operations to Versa Power Systems (Versa).
Depreciation and amortization expense was $1.9 million for the first
quarter of fiscal 2005. The Company recorded a one-time charge totaling $0.9
million, or $0.02 per basic and diluted share, against cost of product sales.
This was related to a planned change in manufacturing processes that is
expected to increase electrical output ("uprate") for improved product
performance and reduced cost in future periods. In addition, the Company
recorded a fixed asset impairment charge and accrued exit costs to
discontinued operations totaling $1.3 million, or $0.02 per basic and diluted
share, related to excess facilities in Calgary, Alberta, Canada.
Significant Progress in 2005
"The agreement with Starwood Hotels and Resorts is a major move forward
for the development of repeatable markets for our DFC products in California,
and the addition of POSCO as an alliance partner expands our Asian market to
Korea," said Jerry D. Leitman, Chairman and CEO of FuelCell Energy. "In
addition, we strengthened our balance sheet to position us for additional
market opportunities for our 'ultra-clean' power plants."
Summary Highlights
Repeat Orders in Key Markets
The Company continues to obtain orders in markets where electricity prices
are $.10/kilowatt hour or higher, grid constraints demand alternative
solutions, customers are concerned about the reliability and cost of current
supply, and where tightening environmental regulation require ultra-clean
solutions. Our current global marketing strategy is focused on Japan,
California, the Northeastern United States, Korea, Canada, and Europe where
these drivers exist.
* Master Energy Services Agreement with Starwood Resorts. FuelCell
Energy and Alliance Power entered into a Master Energy Services
Agreement (MESA) with Starwood Resorts Worldwide to provide DFC power
plants for Starwood properties in California. The first order under
the MESA was a one-megawatt fuel cell power plant for the Sheraton San
Diego Hotel & Marina, the fourth Starwood hotel powered by DFC power
plants.
* DFC 300A Power Plant Ordered by the U.S. Postal Service San Francisco
Processing & Distribution Center. In November 2004, the Company
received an order for a DFC300A power plant from Chevron Energy
Solutions (Chevron) for the U.S. Postal Service San Francisco
Processing & Distribution Center. This installation is unique as it
combines solar peaking capabilities with the Company's base load fuel
cell. This is the epitome of clean efficient power generation. This
follows the October 2004 announcement of a one-megawatt DFC1500 power
plant project with Chevron for the Alameda County's Santa Rita
Correctional Facility in Dublin, Calif.
* Alliance with POSCO, One of the Largest Steel Manufacturers in the
World. In November 2004, FuelCell Energy and Marubeni Corp. formed an
alliance with POSCO, a leading producer of steel for the global
markets, to distribute and package DFC power plants in Korea. As part
of the agreement, POSCO purchased three 250-kilowatt DFC power plants,
with the first being sited at Pohang University of Science and
Technology. The Korean Ministry of Commerce, Industry and Energy has
committed to install 300 fuel cell units, sized 250-kilowatts to one
megawatt, for distributed power generation by 2012.
* Wastewater Treatment Market Expands to Food Processing Facility.
Marubeni announced the siting of a DFC300A power plant at the Tokyo
'Super Eco Town' project in Japan. This project that will operate on
anaerobic digester gas from a food recycling facility expands the
Company's industrial wastewater treatment vertical market segment to
food processing.
Renewable Portfolio Markets Emerging
* Renewable portfolio standards that support clean, efficient power
generation in the U.S. are growing, with programs in place in 18 states
and the District of Columbia. In many instances, the Company's DFC
power plants, including those operating on natural gas, meet the
eligibility requirements.
* Recently, Connecticut passed legislation that will require the state's
utilities to generate 100 megawatts of power from renewable
technologies contracted by mid-2007 (Project 100). In New York, a
renewable energy policy was adopted that will require 3,700 megawatts
of generation from renewable technologies. As part of this program,
the Long Island Power Authority issued a request for proposal for 10
megawatts of fuel cell power plants for installation in 2006.
Meeting Customer Expectations of Product Performance
* Shipped 1.5 Megawatts of DFC Power Plants and Cell Components. During
the first quarter of fiscal 2005, FuelCell Energy shipped four DFC300A
power plants, which included two units for Korea, one unit for Japan,
and one unit for the Salt River Project in Arizona. In addition, the
Company shipped DFC components for two 250-kilowatt stacks for MTU in
Germany. In February 2005, the Company shipped the first two DFC300A
power plants of four for the one-megawatt Sierra Nevada Brewing Co.
project in California.
* Kilowatt Hours At Customer Sites Increased to Over 62 Million. Through
February 2005, more than 62 million kilowatt hours of electricity have
been generated by fuel cell power plants worldwide incorporating
FuelCell Energy's DFC technology. This is more than double the 27
million kilowatt hours reported a year ago. Approximately 5 percent
was generated from the Company's first megawatt DFC1500 power plant for
King County. This increased operating hours at customer sites has
provided additional experience for improvement of the performance and
availability of DFC power plants. From January 2003 through January
2005, the fleet availability for the FuelCell Energy's DFC power plants
was 87 percent.
* Municipal Wastewater Treatment Market Expands in Santa Barbara.
Subsequent to the close of the first quarter of fiscal 2005, two
DFC300A power plants began generating power and heat for the El Estero
Wastewater Treatment Facility in Santa Barbara, Calif. This is the
Company's eighth wastewater treatment application, which includes
FuelCell Energy's first one-megawatt DFC1500 power plant at King
County.
Reducing Product Costs
* First New Sub-Megawatt DFC Power Plant Being Assembled. The Company
started assembling its first sub-megawatt power plant incorporating the
2004 value-engineering changes that reduces product cost by 25 percent.
Production of these units is scheduled for late summer. The new
product design opens up the 250-kilowatt DFC power plant into three
separate skids that allows for the introduction of more standard
balance of plant components at significantly reduced costs.
* Rolling Three Year Cost Reduction Efforts Ongoing. FuelCell Energy has
established a rolling three-year cost-reduction cycle with targets of
reducing product costs by 20 to 25 percent each year. The similarity
of sub-megawatt and megawatt-class power plants enables value-
engineering cost reduction initiatives to apply to all DFC products.
Cash Position Strengthened
FuelCell Energy received net proceeds of $99.0 million from the sale of
Series B cumulative perpetual preferred stock for increasing market
opportunities for its DFC products. As of January 31, 2005, the Company has
over $230 million in cash, cash equivalents and investments (U.S. Treasuries).
About Direct FuelCells
FuelCell Energy's Direct FuelCells efficiently generate clean electricity
at distributed customer locations, including municipal/industrial wastewater
treatment facilities, telecommunications/data centers, hotels, universities,
manufacturing, hospitals, prisons, federal and grid support. Direct FuelCells
convert readily available fuels, such as natural gas or waste gas, to
electrical power with greater efficiency than any competing technology of
comparable size, including other fuel cells. This high-efficiency technology
generates more electric power from less fuel in its size range and has the
lowest emissions of any fossil based electric generating technology because
the fuel is not burned. DFC power plants can be sited at or near users, and
the heat byproduct can be used for cogeneration applications such as district
heating, hot water or absorption chilling for air conditioning. Depending
upon location, application and load size, the Company's DFC power plants in a
cogeneration configuration can achieve an overall energy efficiency of between
70 and 80 percent. The sub-megawatt fuel cell power plant is a collaborative
effort using Direct FuelCell(R) technology of FuelCell Energy and the Hot
Module(R) balance of plant design of MTU CFC Solutions, GmbH, a subsidiary of
DaimlerChrysler.
About FuelCell Energy, Inc.
FuelCell Energy, Inc., based in Danbury, Connecticut, is a world leader in
the development and manufacture of high temperature fuel cells for clean
electric power generation. The Company has developed commercial distribution
alliances for its carbonate Direct FuelCell products with world class
companies such as Caterpillar, PPL Energy Plus, Alliance Power, Chevron Energy
Solutions and LOGANEnergy in the U.S.; Marubeni Corporation in Asia; MTU CFC
Solutions in Europe; and Enbridge Inc. in Canada. FuelCell Energy developed
its patented Direct FuelCell technology for stationary power plants with the
U.S. Department of Energy through its Office of Fossil Energy's National
Energy Technology Laboratory.
FuelCell Energy is also developing next generation high temperature fuel
cell products, such as a diesel fueled marine Ship Service Fuel Cell, a
combined-cycle DFC/Turbine(R) power plant and solid oxide fuel cells through
its investment in and partnership with Versa Power Systems for applications up
to 100 kilowatts. More information is available at
http://www.fuelcellenergy.com .
This news release contains forward-looking statements, including
statements regarding the Company's plans and expectations regarding the
development and commercialization of its fuel cell technology. 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, the risk that commercial
field trials of the Company's products will not occur when anticipated,
general risks associated with product development, manufacturing, changes in
the utility regulatory environment, potential volatility of energy prices,
rapid technological change, and competition, 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.
FUELCELL ENERGY, INC.
Consolidated Statements of Operations
(UNAUDITED)
(Dollars in thousands, except share and per share amounts)
Three Months Ended
January 31,
2005 2004
Revenues:
Product sales and revenues $ 5,032 $ 2,028
Research and development contracts 2,522 5,366
Total revenues 7,554 7,394
Costs and expenses:
Cost of product sales and revenues 13,713 7,623
Cost of research and development contracts 2,814 7,471
Administrative and selling expenses 3,130 3,701
Purchased in-process research
and development -- 12,200
Research and development expenses 5,233 5,865
Total costs and expenses 24,890 36,860
Loss from operations (17,336) (29,466)
License fee income, net 71 67
Interest expense (42) (37)
Loss from equity investments (340) --
Interest and other income, net 875 918
Net loss from continuing operations
before provision for income tax $ (16,772) $ (28,518)
Provision for income taxes -- --
Net loss from continuing operations $ (16,772) $ (28,518)
Discontinued operations, net of tax (1,252) 656
Net loss $ (18,024) $ (27,862)
Preferred stock dividends (1,342) (240)
Net loss to common shareholders $ (19,366) $ (28,102)
Loss per share basic and diluted:
Continuing operations $ (0.37) $ (0.60)
Discontinued operations (0.03) 0.01
Net loss to common shareholders $ (0.40) $ (0.59)
Basic and diluted weighted
average shares outstanding 48,152,998 47,368,764
FUELCELL ENERGY, INC.
Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
January 31,
2005 October 31,
(Unaudited) 2004
ASSETS
Current assets:
Cash and cash equivalents $ 168,744 $ 45,759
Investments: U.S. treasury securities 51,694 106,636
Accounts receivable, net 7,721 7,599
Inventories, net 13,285 14,619
Other current assets, net 4,007 4,253
Total current assets 245,451 178,866
Property, plant and equipment, net 41,892 42,254
Investments: long-term U.S. treasury
securities 10,999 --
Assets held for sale -- 12,344
Equity Investments 13,685 2,125
Other assets, net 673 921
Total assets $ 312,700 $ 236,510
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and other
liabilities $ 562 $ 539
Accounts payable 5,835 9,526
Accrued liabilities 6,288 5,255
Deferred license fee income 263 37
Deferred revenue 5,700 6,713
Total current liabilities 18,648 22,070
Long-term debt and other liabilities 1,217 1,476
Total liabilities 19,865 23,546
Shareholders' equity:
Preferred stock ($0.01 par value); 200,000
shares authorized at January 31, 2005 and
October 31, 2004:
Series B Convertible Preferred Stock;
105,875 shares issued and outstanding at
January 31, 2005. 1 --
Common stock ($.0001 par value); 150,000,000
shares authorized and 48,163,474 and
48,132,694 shares issued and outstanding at
January 31, 2005 and October 31, 2004,
respectively 5 5
Preferred shares of subsidiary 10,181 10,259
Additional paid-in capital 522,825 424,621
Accumulated deficit (240,177) (221,921)
Total shareholders' equity 292,835 212,964
Total liabilities and shareholders' equity $ 312,700 $ 236,510
FUELCELL ENERGY, INC.
Reconciliation from Reported Net loss and loss per share to
Adjusted net loss and Adjusted loss per share to common shareholders
(UNAUDITED)
(Dollars in thousands, except share and per share amounts)
Three Months Ended
January 31,
2005 2004
Net loss to common shareholders as reported $(19,366) $(28,102)
Purchased in-process research and development -- 12,200
Adjusted net loss to common shareholders $(19,366) $(15,902)
Basic and diluted loss per share, as reported $(0.40) $(0.59)
Purchased in-process research and development -- 0.25
Adjusted basic and diluted loss per share $(0.40) $(0.34)
* On November 3, 2003, FuelCell Energy completed the acquisition of
Global Thermoelectric Inc. (Global) and combined operations. The
acquisition has been accounted for as a purchase under accounting
principles generally accepted in the United States of America (GAAP)
and therefore FuelCell Energy's financial data prior to the acquisition
have not been restated to include Global's financial data. Global's
financial results have been reported in FuelCell Energy's financial
reporting beginning on November 3, 2003.
* "Adjusted Net Loss" and "Adjusted Basic and Diluted Loss Per Share" are
defined as reported net loss to common shareholders and reported basic
and diluted loss per share excluding the impact of the purchased in-
process research and development charge taken in conjunction with the
acquisition of Global. These are not GAAP financial measures.
* As required by Financial Accounting Standards Board Interpretation No.
4, "Applicability of FASB Statement No. 2 to Business Combinations
Accounted for by the Purchase Method ("FIN 4")", the portion of the
purchase price allocated to in-process research and development
(related to Global's research of Solid Oxide Fuel Cells) of $12.2
million was expensed in the three-month period ended January 31, 2004.
Purchased in-process research and development is excluded from Adjusted
net loss as this is a one-time charge to the purchase accounting of our
acquisition of Global.
* The Company has used non-GAAP pro forma financial measures in analyzing
financial results because they provide meaningful information regarding
the Company's operational performance and facilitate management's
internal comparisons to the Company's historical operating results and
comparisons to competitors' operating results. The Company believes
that these non-GAAP financial measures are useful to investors because
they allow for greater transparency.
* These non-GAAP financial measures may be different from non-GAAP
financial measures used by other companies. Non-GAAP financial measures
should not be considered as a substitute for, or superior to, measures
of financial performance prepared in accordance with GAAP.
SOURCE FuelCell Energy, Inc.
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Related links:
http://www.fuelcellenergy.com
CONTACT:
Steven P. Eschbach, CFA, FuelCell Energy,
Inc., +1-203-825-6000, seschbach@fce.com
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