Notes to the reconciliation of GAAP to non-GAAP Consolidated Statements of Operations information are as follows:
(1) Adjustment for the three and twelve months ended October 31, 2012 of $3.6 million represents a non-cash impairment charge of the Company's equity investment in Versa.
(2) FuelCell Energy, Inc. has committed to a repair and upgrade program to fix a performance shortfall for a select group of 1.2 MW fuel cell modules produced between 2007 and early 2009. Second quarter 2011 earnings was impacted by a charge of approximately $8.8 million, which was accounted for as an increase to cost of goods sold. The estimate for the repair and upgrade program was revised in the fourth quarter of 2011 resulting in a decrease to cost of goods sold of approximately $0.5 million. The full fiscal year 2011 impact was a charge of $8.3 million. The estimate for the repair and upgrade program was further revised in the fourth quarter of 2012 to adjust for the cost of modules which are expected to be deployed as field replacements when needed. This resulted in a charge to cost of goods sold in the fourth quarter of 2012 of $0.5 million. Product sales, cost of product sales and revenue, gross profit and product sales cost-to-revenue ratio for the three and twelve months ended October 31, 2012 and 2011 were as follows:
|Three Months Ended||Twelve Months Ended|
|October 31,||October 31,|
|GAAP Revenue and Cost of Sales|
|Product sales and revenues||$ 33,853||$ 33,289||$ 113,133||$ 115,104|
|Cost of product sales and revenues||32,859||32,698||112,921||127,350|
|Gross profit/(loss) from product sales and revenues||$ 994||$ 591||$ 212||$ (12,246)|
|Product Sales Cost-to-revenue ratio (a)||0.97||0.98||1.00||1.11|
|Non-GAAP Adjustment to cost of product sales and revenues:|
|Repair and Upgrade Cost||$ 462||$ (471)||$ 462||$ 8,281|
|Gross Profit (non-GAAP):|
|Gross profit/(loss) from product sales and revenues||$1,456||$ 120||$ 674||$ (3,965)|
|Gross profit/(loss) from research and development contracts||(116)||(152)||233||(364)|
|Total||$ 1,340||$ (32)||$ 907||$ (4,329)|
|Product Sales Cost-to-revenue ratio (non-GAAP) (a)||0.96||1.00||0.99||1.03|
|(a) Cost-to-revenue ratio is calculated as cost of product sales and revenues divided by product sales and revenues.|
(3) During the three months ended April 30, 2011 the Company entered into an agreement with Enbridge, Inc. to modify an agreement for the Series 1 preferred shares. While this modification did not result in a material change to future cash flows, it did result in a revaluation of the instrument and a reclassification of amounts due as short and long term liabilities. An adjustment to additional paid in capital and loss to common shareholders of $9.0 million was incurred in the second quarter of 2011 to adjust the historic carrying value of the Series I preferred shares to the current fair value.
CONTACT: FuelCell Energy, Inc. Kurt Goddard, Vice President Investor Relations 203-830-7494 firstname.lastname@example.org
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