FuelCell Energy Management Discusses Q3 2012 Results - Earnings Call Transcript

We have returned to a 56-megawatt run rate, which will enable product margin expansion. Our technology is versatile, and I will discuss new programs, potential commercialization opportunities arising from our advanced technology initiatives.

We continue to deepen existing relationships and develop new relationships with local, state and federal legislators as we share the attributes of our power plants and job creation potential of our business model.

I will discuss our performance and activity in more detail after Mike Bishop, our Chief Financial Officer, reviews our financial results for the quarter. Mike?

Michael S. Bishop

Thank you, Chip. Good morning, and thank you for joining our call today. Please turn to Slide 5 titled Financial Highlights. FuelCell Energy reported total revenues for the third quarter of 2012 of $29.7 million compared to $31.2 million in the same period last year. Product sales and revenues for the third quarter totaled $27.6 million compared to $29.4 million reported in the prior year. Research and development contract revenue was $2.1 million for the third quarter of 2012 compared to $1.8 million for the prior year quarter.

For the third quarter of 2012, our gross loss of $2.7 million was realized compared to a gross profit of $100,000 for the prior year quarter. Annualized production volume in the third quarter of 2012 was approximately 45 megawatts compared to 56 megawatts in the prior year period. The company expects to generate profits at a rate of 50 to 55 megawatts. Thus, the reduced run rate in the quarter combined with a mix heavily weighted towards kits sales drove negative gross margin. In addition, a $1.1 million inventory obsolescence charge was taken in the third quarter of 2012 for some early generation sub-megawatt balance-of-plant parts.

Total operating expenses were $7.8 million for the third quarter of 2012 compared to $7.5 million in the prior year. Although operating expenses are down sequentially from $8 million in the second quarter of 2012, G&A expenses are up over the prior year as a result of higher business development activity and the addition of our business entity in Germany.

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