Capstone Announces First-Quarter Results
CHATSWORTH, Calif.--April 20, 2001--Capstone Turbine Corp. , a leading producer of low-emission microturbine systems, today reported revenue of $8.9 million for the first quarter ended March 31, 2001, compared with revenue of $3.7 million for the first quarter of 2000.The increase in revenue reflects greater sales to an expanded customer base, which has resulted from the company's increased marketing efforts.
For the first quarter of 2001, Capstone's net loss attributable to common stockholders decreased to $9.5 million, or 12 cents per share on 76,048,770 shares, which includes $2.1 million, or 3 cents per share, of costs associated with the acceleration of the company's recuperator core-manufacturing program. The loss in 2001 compares with a loss of $147.7 million, or $36.49 per share on 4,048,970 shares, for the same period of 2000.
In accordance with GAAP, the company accounts for its preproduction costs associated with its recuperator core-manufacturing program as a current period expense. The company is now targeting production of its recuperator cores in June, rather than the original September time frame. Capstone anticipates that the production of its own recuperator cores will have a positive impact on the company's gross margin.
Quarterly Highlights
During the first quarter of 2001, Capstone:
| -- | Hired a number of new sales and marketing management team members, including: |
| -- | Michael Tingus as president-Capstone California; |
| -- | Dick Carryer as vice president-Canadian Business Development; |
| -- | Hal Koyama as vice president-Global Business Development; |
| -- | Doug Condon as vice president-Energy Service Provider Sales; |
| -- | Kevin Young as vice president-Distributor Sales. |
| -- | Finalized a number of new distributor arrangements around the world, including, in part, signed agreements with: |
| -- | Totalsupport Ltd. in Nigeria for 26 units; |
| -- | Gridlink/Ensource in Canada for 26 units; |
| -- | Conuar/Pecom Energia in Argentina for 26 units; |
| -- | Advantica (formerly BG Technologies) in the United Kingdom for 250 units over the next two years. |
| -- | Shipped its first microturbines to the continents of South America and Africa; |
| -- | Received certification from the California Air Resources Board (CARB) for its diesel-fueled microturbine power system for use in commercial hybrid electric vehicles. |
| -- | Initiated efforts at the state level in Sacramento to have the Capstone MicroTurbine better understood by state legislators as an environmentally friendly power-generation device that should be eligible for the same type and kinds of subsidies currently available for fuel cells and other devices classified in the renewable category. |
"I am pleased to report that we continue to progress in line with our expectations -- including sales, research and development, and the expansion of our production capabilities," said Dr. Ake Almgren, president and chief executive officer of Capstone Turbine.
"With regard to sales in particular, I would like to say a few things. While the power-supply issues in California have brought increased attention on the Capstone MicroTurbine as a distributed generation solution, it is important to note that we are making progress in penetrating all of our markets and applications.
"As an example, I would like to point out the distribution agreements that were announced earlier this week with two of our Japanese partners, Takuma and Meidensha-Sumitomo, for a total of 350 microturbines. Both of these companies intend to use our microturbines in the combined-heat-and-power (CHP), chiller and other micro- cogeneration applications.
"While the power quality and reliability market has received a great deal of attention because of California's energy problems, these latest distribution agreements are a good illustration of what we have known for quite some time: that there are numerous markets for our microturbines that are making material contributions to achieving our goals. In addition to CHP and power quality and reliability, we continue to make strong sales into the resource recovery and the hybrid electric vehicle markets.
"The numerous microturbines being sold for different applications at this stage of the technology's emergence speaks highly about the opportunities ahead for Capstone.
"While we have stepped up our sales efforts directly related to positioning our microturbines as part of the solution to California's power issues, we have not done so at the expense of neglecting our other markets. We are making certain that we strive to capitalize on all of the opportunities we have available to us.
"We are investing in sales and marketing activities to penetrate our markets, and recently announced a new sales structure that has strengthened our efforts in this regard. With each channel directed by an experienced sales executive, we are now bringing our products to market in four ways.
"First, through the distributor channel, which encompasses equipment providers who sell, lease and/or rent Capstone systems and provide value-added services.
"Second, through the energy service provider channel, which is composed of entities that install and own Capstone MicroTurbines and sell the energy they produce to end users.
"Third, the original equipment manufacturer channel, which integrates our microturbine power systems into other finished products, such as hybrid electric vehicles and uninterruptible power systems.
"Finally, we have Capstone California, our wholly owned subsidiary that is focused exclusively on selling our microturbine-based solutions into the California market. Capstone California has only been in existence a few weeks but has already demonstrated traction in the market.
"Most significantly, the Los Angeles Department of Water and Power in conjunction with the South Coast Air Quality Management District have signed agreements to utilize Capstone MicroTurbines as part of their solutions to California power-supply issues. We aim to make use of the endorsement and support of the Capstone MicroTurbine by these agencies in our efforts to create additional sales momentum," said Almgren.
Operational Highlights
The company shipped 307 units during the first quarter: 297 of the 30-kilowatt microturbines and 10 of the 60-kilowatt microturbines. The number of 60-kilowatt units shipped was less than the company had anticipated due to continued electronic component shortages that impacted production volumes. However, the component shortage was resolved in March, and the company's aim is to ship an increased number of the 60-kilowatt units in the second quarter.
Capstone is currently shipping high- and low-pressure natural gas models of its 60-kilowatt systems that operate in grid-connect mode. The company's top research and development priority at the current time is development of additional 60-kilowatt product releases, including stand-alone and dual-mode functionality, as well as additional gaseous and liquid fuel offerings.
If developments go as expected, the company currently anticipates shipping 60-kilowatt units with stand-alone and dual-mode functionality in the May/June time frame.
"We anticipate that the availability of the additional functionality and fuel types for the 60-kilowatt family of products could have a significant positive impact on sales of these systems," said Almgren.
"To provide an idea of the potential sales impact, approximately two-thirds of the 30-kilowatt units that we have shipped to date have been with the stand-alone and dual-mode functionality. Our goal is for sales of the 60-kilowatt units to ramp up in the third and fourth quarters once they have this added functionality as well."
Financial Highlights
For the first quarter of 2001, gross margin was 4 percent, compared with a negative 37 percent gross margin in the same period of 2000 and a slightly negative gross margin in the fourth quarter of 2001. The improvement in gross margin is primarily attributable to factory overhead costs being allocated over a greater number of units produced.
Research and development expenses increased to $2.8 million, compared with $2.4 million in the first quarter of 2000. Research and development expenses related primarily to the development of additional product releases for the company's 60-kilowatt line of microturbines.
SG&A increased to $9.8 million, compared with $4.4 million in the first quarter of 2000. This increase is primarily attributable to $2.1 million in preproduction expenses associated with the company's recuperator core-manufacturing project, a $1.0 million increase in noncash expenses associated with stock-based compensation and marketing rights amortization, and approximately $1.9 million in increased sales and marketing expenses.
The company finished the first quarter of 2001 with $217.6 million in cash and cash equivalents and no long-term debt.
ACWA Update
"We have currently shipped or put into backlog approximately 50 units related to Harza Energy's agreement with the Association of California Water Agencies," said Jeff Watts, chief financial officer. "We continue to receive additional orders from Harza on a regular basis related to their agreement with the ACWA."
About Capstone Turbine
Capstone Turbine (www.microturbine.com) -- winner of Financial Times Energy's (www.ftenergy.com) 2000 Global Energy Award for Most Innovative Commercial Technology -- is a leading producer of low-emission microturbine systems. In 1998, Capstone was the first to offer commercial power products utilizing microturbine technology, the result of more than 10 years of focused research.
Worldwide, more than 1,000 commercial production Capstone MicroTurbine systems serve, among others, the following applications:
-- Hybrid electric vehicles (HEVs): onboard generation;
-- Resource recovery: converting oilfield and biomass waste gases
into electricity;
-- Micro-cogeneration: combined heat/power/chilling solutions;
-- The 9s market: power quality and reliability.
Certain statements contained in this release may be deemed to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, and Capstone Turbine Corporation intends that such forward-looking statements be subject to the safe harbor created thereby. Such forward-looking statements relate to: 1) Capstone's penetration of its target markets, including its ability to be a part of the solution to California's power supply issues; 2) the emergence of additional markets for microturbines; 3) demand for microturbines and the ability of the Company to ship its 60-kilowatt systems; 4) the Company's development of additional microturbine product releases; 5) the Company's development and initiation of recuperator core manufacturing activities; 6) the impact of production of recuperator cores and the amortization of factory overhead on the Company's gross margin; and 7) component shortages experienced by the Company and the Company's ability to overcome such shortages. Capstone cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein. Such factors include, but are not limited to: 1) market acceptance of Capstone's technology and products; 2) the size, timing and shipment of individual orders; 3) the ability of Capstone to successfully execute its production and marketing plans; 4) the Company's ability to develop additional microturbine product releases; 5) the Company's ability to successfully develop its recuperator core manufacturing processes and expand production capacity; 6) being able to secure adequate supplies of acceptable quality components or experiencing higher than anticipated costs; 7) exposure to product liability or other tort claims; 8) the Company's ability to control its warranty exposure; 9) the Company's ability to retain key management and technical personnel; 10) barriers to entry in the marketplace or regulations that may effect the Company's ability to sell its products; 11) the Company's ability to protect its intellectual property or if the Company is found to have infringed upon the intellectual property of others; 12) the Company's ability to operate in a highly competitive market against competitors who have significantly greater resources; and other factors detailed in the Company's filings with the Securities and Exchange Commission. Capstone cautions readers not to place undue reliance on these statements, which speak only as of the date of this release. Capstone undertakes no obligation, and specifically disclaims any obligation, to release any revisions to any forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
Notes to Editors:
Capstone Turbine's 2000 annual report, SEC filings, Webcasts and other investor information can be accessed via the "Investor Relations" selection on the company's Web site at www.microturbine.com.
Information on new sales and marketing management team members is at: www.microturbine.com/whatsNew/pressrelease.asp?article=73 and www.microturbine.com/whatsNew/pressrelease.asp?article=66
Information on Q1 distributor arrangements noted is at: www.microturbine.com/whatsNew/pressrelease.asp?article=67 and www.microturbine.com/whatsNew/ensource.html and www.microturbine.com/whatsNew/pecom.html and www.microturbine.com/whatsNew/pressrelease.asp?article=65
Information on CARB certification is at: www.microturbine.com/whatsNew/pressrelease.asp?article=68
Information on the Takuma and Meidensha-Sumitomo agreements are at: www.microturbine.com/whatsNew/pressrelease.asp?article=71 and www.microturbine.com/whatsNew/pressrelease.asp?article=72
Information on the formation of Capstone California is at: www.microturbine.com/whatsNew/pressrelease.asp?article=64
Information on the LADWP/SCAQMD purchase is at: www.microturbine.com/whatsNew/pressrelease.asp?article=69
Information on Capstone MicroTurbines and the California power crisis is at: www.microturbine.com/whatsNew/pressrelease.asp?article=60
Information on the Harza Energy/ACWA agreement is at: www.microturbine.com/whatsNew/CAWater.asp
CAPSTONE TURBINE CORP.
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
2000 2001
Revenues $ 3,746,000 $ 8,906,000
Cost of Goods Sold 5,124,000 8,583,000
Gross (Loss) Profit (1,378,000) 323,000
Operating Costs and Expenses:
Research and development 2,441,000 2,770,000
Selling, general and administrative 4,384,000 9,844,000
Total operating costs and expenses 6,825,000 12,614,000
Loss from Operations (8,203,000) (12,291,000)
Interest Income 723,000 3,044,000
Interest Expense (336,000) (167,000)
Other Income (Expense) 6,000 (54,000)
Loss Before Income Taxes (7,810,000) (9,468,000)
Provision for Income Taxes 1,000 1,000
Net Loss (7,811,000) (9,469,000)
Preferred Stock Dividends, Accretion
and Repurchase (139,932,000) --
Net Loss Attributable to Common
Shareholders $(147,743,000) $(9,469,000)
Weighted Average Common Shares Outstanding 4,048,970 76,048,770
Net Loss per Share of Common Stock --
Basic and Diluted $ (36.49) $ (0.12)
CAPSTONE TURBINE CORP.
Consolidated Balance Sheets
Dec. 31, March 31,
2000 2001
(Unaudited)
Assets:
Current Assets:
Cash and cash equivalents $236,947,000 $217,718,000
Accounts receivable, net of allowance
for doubtful accounts of $85,000 at
Dec. 31, 2000, and $87,000 at
March 31, 2001 3,664,000 6,753,000
Inventory 14,123,000 15,570,000
Prepaid expenses and other current
assets 1,689,000 1,192,000
Total Current Assets 256,423,000 241,233,000
Equipment and Leasehold Improvements:
Machinery, equipment and furniture 13,664,000 13,879,000
Leasehold improvements 3,055,000 3,064,000
Molds and tooling 1,331,000 1,547,000
18,050,000 18,490,000
Less accumulated depreciation and
amortization 6,434,000 6,703,000
Total equipment and leasehold
improvements 11,616,000 11,787,000
Deposits on fixed assets 6,649,000 11,015,000
Other assets 302,000 334,000
Intangible assets, net 27,028,000 26,162,000
Total $302,018,000 $290,531,000
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable $ 4,728,000 $ 4,486,000
Accrued salaries and wages 1,135,000 1,094,000
Other accrued liabilities 1,282,000 1,310,000
Accrued warranty reserve 5,589,000 5,148,000
Deferred revenue 4,064,000 2,208,000
Current portion of capital lease
obligations 1,497,000 1,464,000
Total current liabilities 18,295,000 15,710,000
Noncurrent Liabilities:
Long-term portion of capital lease
obligations 3,999,000 3,618,000
Other long-term liabilities 342,000 375,000
Total noncurrent liabilities 4,341,000 3,993,000
Commitments and Contingencies:
Stockholders' Equity:
Common stock, $.001 par value;
415,000,000 shares authorized;
75,771,303 and 76,314,943 shares issued
and outstanding at Dec. 31, 2000, and
March 31, 2001, respectively 76,000 76,000
Additional paid-in capital 516,738,000 517,653,000
Accumulated deficit (237,432,000) (246,901,000)
Total stockholders' equity 279,382,000 270,828,000
Total $302,018,000 $290,531,000