FuelCell Energy, Inc. reported results for its third quarter ended July 31, 2011 along with its latest accomplishments. FuelCell Energy reported total revenues for the third quarter of 2011 of $31.2 million compared to $18.9 million in the same period last year, an increase of 65 percent. Product sales and revenues in the third quarter were $29.4 million compared to $16.2 million in the prior year quarter, due to increased demand for Direct FuelCell® (DFC®) power plants. Product sales and revenues for the third quarter of 2011 included $21.2 million of power plants and fuel cell kits, $5.5 million primarily from installation services and revenue from the 100kW joint development agreement with POSCO Power, and $2.7 million from service agreements.
The company generated a gross profit for the third quarter of 2011 from products and services of $0.2 million, an important milestone on the path to profitability and the first quarterly gross profit since commercializing its DFC technology. The product cost-to-revenue ratio was 0.99-to-1.00 for the third quarter of 2011 compared to 1.24-to-1.00 for the third quarter of 2010. Increased production volume drove down product costs and contributed to improved absorption of fixed overhead costs as manufacturing and supply chain efficiencies were achieved. Margins for product sales and revenues improved $4.1 million compared to the third quarter of 2010.
Increasing demand for fuel cells and service agreements, including the $129 million order for 70 megawatts (MW) of fuel cell kits and other equipment and services announced in May 2011, drove product sales and service backlog to $230.6 million as of July 31, 2011 compared to $79.8 million as of July 31, 2010. Product backlog was $152.9 million and $55.2 million as of July 31, 2011 and 2010, respectively. Product backlog will be delivered through October 2013. Service agreement backlog was $77.7 million and $24.6 million as of July 31, 2011 and 2010, respectively, and consists of service agreements up to 20 years in duration.
Research and development contract revenue was $1.8 million for the third quarter of 2011 compared to $2.7 million for the third quarter of 2010. The company’s research and development backlog totaled $13.6 million as of July 31, 2011 compared to $7.4 million as of July 31, 2010 with the increase due to awarding of the phase three of the solid oxide fuel cell (SOFC) contract by the U.S. Department of Energy (DOE) in May 2011.
Loss from operations for the third quarter of 2011 decreased to $7.4 million compared to $12.6 million for the comparable prior year period reflecting increased sales volume combined with lower costs. Net loss to common shareholders for the third quarter of 2011 decreased to $8.6 million, or $0.07 per basic and diluted share, compared to $13.8 million or $0.15 per basic and diluted share in the third quarter of 2010.
For the nine months ended July 31, 2011, FuelCell Energy reported revenue of $87.8 million compared to $50.1 million for the prior year period, an increase of 75 percent. Product sales and revenues were $81.8 million compared to $42.0 million for the prior year period. Research and development contract revenue was $6.0 million compared to $8.0 million for the prior year period.
Loss from operations for the nine months ended July 31, 2011 was $37.8 million, compared to $42.3 million for the nine months ended July 31, 2010. Excluding non-recurring charges incurred in 2011, adjusted loss from operations for the nine months ended July 31, 2011 was $29.0 million, an improvement of 31 percent compared to the prior year period, which did not have any non-recurring charges.
Net loss to common shareholders for the nine months ended July 31, 2011 was $50.0 million or $0.41 per basic and diluted share compared to $45.9 million or $0.52 per basic and diluted share for the nine months ended July 31, 2010. Excluding non-recurring charges incurred in 2011, net loss to common shareholders for the nine months ended July 31, 2011 was $32.3 million or $0.26 per basic and diluted share. The prior year period did not have non-recurring charges. Margins for product sales and revenues improved $2.3 million over the prior period due to lower costs. The increase in interest expense in the current period compared to the prior period reflects the modification in the Series I preferred share agreement and is offset by a reduction in Accretion of redeemable preferred stock of subsidiary. The product cost-to-revenue ratio improved to 1.16-to-1.00 compared to 1.36-to-1.00 for the same period one year ago due to sales of higher margin products and improved absorption of fixed overhead costs from increased volume.
Total cash, cash equivalents and investments in U.S. Treasuries were $49.5 million as of July 31, 2011. Net use of cash, cash equivalents and investments in the third quarter of 2011 was $5.5 million consisting of $0.9 million net cash used in operating activities, $1.1 million net cash used from investing activities and $3.5 million net cash used in financing activities. Capital spending for the third quarter of 2011 was $0.5 million and depreciation expense was $1.6 million.
Net use of cash, cash equivalents and investments for the nine months ended July 31, 2011 was $25.4 million excluding revolver borrowings of $2.6 million and net proceeds of $17.8 million from the registered direct offering of common stock, compared to $29.1 million for the prior year, excluding net proceeds of $32.1 million from the public offering of common stock. Year to date 2011 cash utilization is within the Company’s plan and full year cash utilization is forecasted to be at the low end of the previously reported range of $24 million to $32 million.
