FuelCell Energy, Inc. reported results for its second quarter ended April 30, 2011. The company reported total revenues for the second quarter of 2011 of $28.6 million compared to $16.6 million in the same period last year. Product sales and revenues in the second quarter were $26.7 million compared to $13.0 million in the prior year quarter, increasing as a result of growing demand for ultra-clean fuel cells. Product sales and revenues for the second quarter of 2011 included $21.4 million of power plants and components, $2.2 million from construction and installation services and sale of equipment under the 100 kilowatt (kW) joint development agreement with POSCO Power, and $3.1 million from long term service and power purchase agreements.
Cost of sales and margins for the second quarter of 2011 were negatively impacted by a charge of $8.8 million from a repair and upgrade program for a select group of 1.2 MW fuel cell modules produced between 2007 and early 2009. Margins for product sales and revenues declined $4.7 million compared to the second quarter of 2010 while the product cost-to-revenue ratio improved to 1.40-to-1.00 from 1.47-to-1.00.
Excluding the repair and upgrade program charge incurred in the second quarter of 2011, margins for product sales and revenues would have improved by $4.1 million over the prior year quarter and the product cost-to-revenue ratio would have improved to 1.08-to-1.00, primarily from higher product margins and lower commissioning and warranty costs.
Increasing demand for fuel cells and service agreements drove product sales and service backlog to $135.5 million as of April 30, 2011 compared to $75.5 million as of April 30, 2010. Product order backlog was $60.4 million and $48.1 million and backlog for long-term service agreements was $75.1 million and $27.4 million as of April 30, 2011 and 2010, respectively. In May 2011, the largest order in Company history was announced for an estimated $129 million for 70 MW of fuel cell kits and other equipment and services. The value of the fuel cell kits will be added to third quarter 2011 product backlog.
Research and development contract revenue was $1.9 million for the second quarter of 2011 compared to $3.6 million for the second quarter of 2010. Contract revenue reflects lower activity under the U.S. Department of Energy (DOE) solid oxide fuel cell (SOFC) development program compared to the second quarter of 2010. The Company’s research and development backlog totaled $15.2 million as of April 30, 2011 compared to $9.9 million as of April 30, 2010. The award of the phase three SOFC contract by the DOE during the quarter increased research and development backlog by $8.2 million.
Loss from operations for the second quarter of 2011 increased to $19.8 million compared to $15.4 million for the comparable prior year period. Excluding the non-recurring charge, loss from operations would have improved to $11.1 million.
Net loss to common shareholders for the second quarter of 2011 increased to $29.7 million, or $0.24 per basic and diluted share, compared to $16.7 million or $0.20 per basic and diluted share in the second quarter of 2010. During the second quarter of 2011, two items impacted net loss to common shareholders, including the previously discussed repair and upgrade program charge of $8.8 million and an adjustment to additional paid in capital and loss to common shareholders of $9.0 million to adjust the historic carrying value of the Series I preferred shares to the current fair value.