Nature of Business and Basis of Presentation

9 Months Ended

Jul. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

Nature of Business and Basis of Presentation

FuelCell Energy, Inc. and subsidiaries (the “Company”, “FuelCell Energy”, “we”, “us”, or “our”) is a Delaware corporation engaged in the development, manufacture and service of stationary fuel cells power plants for clean electric power generation. Our Direct FuelCell power plants produce ultra-clean, efficient and reliable 24/7 base load electricity and usable high quality heat for commercial, industrial, government and utility customers. We have commercialized our stationary carbonate fuel cells and are also pursuing the complementary development of planar solid oxide fuel cell and other fuel cell technologies. We continue to invest in new product and market development and, as such, we are not currently generating positive cash flow from our operations.  Our operations are funded primarily through cash generated from product sales and research and development contracts, license fee income and sales of equity and debt securities. In order to produce positive cash flow from operations, we need to be successful at increasing annual order volume and continuing our cost reduction efforts.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. Accordingly, they do not contain all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all normal and recurring adjustments necessary to fairly present our financial position as of July 31, 2012 have been included. All intercompany accounts and transactions have been eliminated.

The Company formed a Germany entity, FuelCell Energy Solutions, GmbH (FCES) in the fourth quarter of fiscal 2011 to facilitate business development in Europe. FCES is a joint venture with the Company owning 75%. Fraunhofer IKTS (Fraunhofer) contributed $1.0 million for their 25% ownership interest in the third quarter of 2012. FCES is consolidated in the financial statements of the Company, including the related noncontrolling interest.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  The balance sheet as of October 31, 2011 has been derived from the audited financial statements at that date, but it does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.These financial statements should be read in conjunction with our financial statements and notes thereto for the year ended October 31, 2011, which are contained in our Annual Report on Form 10-K previously filed with the Securities and Exchange Commission.  The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year.

Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Estimates are used in accounting for, among other things, revenue recognition, excess, slow-moving and obsolete inventories, product warranty costs, reserves on service agreements ("SA"), allowance for uncollectible receivables, depreciation and amortization, impairment of assets, taxes, and contingencies. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.  Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates.

Concentrations

We contract with a concentrated number of customers for the sale of products and for research and development contracts. Significant revenues from individual customers for the three and nine months ended July 31, 2012 and 2011 included POSCO Energy (“POSCO”), which is a related party and owns approximately 17 percent of the outstanding common shares of the Company as of July 31, 2012, BioFuels Energy, LLC, UTS BioEnergy, LLC and the U.S. Government.

The percent of consolidated revenues from each customer is presented below.

	Three Months Ended July 31,				Nine Months Ended July 31,
	2012		2011		2012		2011
POSCO Energy	72	%	34	%	72	%	49	%
BioFuels Fuel Cells, LLC	1	%	19	%	—	%	16	%
UTS BioEnergy, LLC	—	%	15	%	2	%	6	%
U.S. Government	9	%	6	%	7	%	7	%
Combined	82	%	74	%	81	%	78	%

Subsequent Events

We have evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements. There were no subsequent events requiring disclosure.

Comprehensive Loss

Comprehensive loss for the periods presented was as follows:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2012			2011			2012			2011
Net loss	$	(10,010	)	$	(7,830	)	$	(24,387	)	$	(38,845	)
Foreign currency translation adjustments	(78		)	—			(80		)	4
Comprehensive loss	$	(10,088	)	$	(7,830	)	$	(24,467	)	$	(38,841	)