Exhibit 99.1 Capstone Turbine Announces Fiscal Third Quarter Results CHATSWORTH, Calif.--(BUSINESS WIRE)--Feb. 5, 2004--Capstone Turbine Corporation (Nasdaq:CPST) (www.microturbine.com), the world's leading microturbine power systems manufacturer, today reported results for its third fiscal quarter ended December 31, 2003. Revenue for the quarter was $3.3 million as compared with $3.6 million in the period a year ago. Capstone's CEO, John Tucker, said, "Our performance was off versus expectations due to some adjustments in deliveries to accommodate our customers' needs. However, we had a good order rate of 4.3 megawatts and we exited the quarter with 6.2 megawatts of product in backlog." For the third quarter of fiscal 2004, Capstone's net loss was $11.6 million, or ($0.14) per share compared to a net loss of $20.7 million or ($0.26) per share during the third quarter of fiscal year 2003. Providing an update on the Company's progress, Tucker commented, "We are continuing to enhance the depth and talent in the organization. Since last quarter, we have recruited Vice Presidents for Quality, Service and Business Development as well as for two key sales positions, The Americas and International. We continue to attack our key priorities of improving the robustness of our products, enhancing customer service and integrating the design and manufacturing process. Furthermore, we have initiated our strategic planning process which will establish a three-year roadmap for improved performance." Tucker continued, "We have been active in pursuing several new opportunities that pose long-term prospects for the business. These new prospects span from biogas installations in Europe, to numerous projects that integrate our microturbines into larger power-packs. These power-packs range from 240-kilowatts used by UTC Power, a division of United Technologies Corporation, in their Pure Comfort 240, a combined cooling and power product; to 270-kilowatts, soon to be installed in support of the Ground Mid-Course Defense Project, to an 840-kilowatt package being developed for industrial and remote power use in Nigeria. Additionally, our distributors continue to develop exciting opportunities for Capstone MicroTurbines(TM) and we will be considering these opportunities in our strategic planning evaluations." In summary, Tucker concluded, "We are making significant progress on our targeted priorities and, with the development of our strategic plan, we look forward to charting a positive course for Capstone's future." Third Quarter Financial Highlights Gross loss in the third quarter of the fiscal year was $3.1 million, compared to $12.4 million for the same period a year ago. Last year's third quarter included a $5.0 million charge for the partial impairment of the recuperator core manufacturing facility and a $3.6 million charge to adjust the warranty reserve balance. In the current period, the Company recorded $1.2 million in warranty costs related to accommodations made to Japanese distributors. Research and development ("R&D") costs were $3.0 million in the period compared to $2.0 million in the third fiscal quarter of 2003. Costs in fiscal 2003 were reported net of $1.5 million in contract offsets. While R&D spending decreased $0.5 million between periods, the lack of contract reimbursement offsets in the current period resulted in an increase in reported R&D costs of $1.0 million. Capstone reported that it has suspended billing the Department of Energy ("DOE") for the AMTS program, which funds development of Capstone's C200 product, because of a current lack of committed funding. The Company noted, however, that it intends to resume billings under the program when the DOE receives additional funding appropriations for the project. Selling, general and administrative expenses decreased to $5.7 million from $6.8 million a year ago reflecting lower spending rates in the current period. As of December 31, 2003, Capstone had $111.7 million in cash and cash equivalents, with no long-term debt. The company's cash utilization was $8.2 million in the current quarter compared to a use of $4.0 million in the same period a year ago. This change primarily reflects $4.0 million in proceeds from sale of stock a year ago. Conference call The company will host a conference call today, Thursday, February 5, at 2:00 p.m. Pacific Time, to further review the company's third fiscal quarter results. Access to the live broadcast and a replay of the webcast will be available until May 5, 2004 through the Company's web site: www.microturbine.com. About Capstone Turbine Capstone Turbine Corporation (www.microturbine.com)(Nasdaq:CPST) is the world's 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 ten years of focused research. Capstone Turbine has sold and shipped more than 2,500 commercial production Capstone MicroTurbine(TM) systems to customers worldwide. These award-winning systems have logged more than 5 million hours of operation. This press release contains "forward-looking statements," as that term is used in the federal securities laws, about Capstone's business, with regard to its ability to address its market challenges, identify and successfully develop the market opportunities with strong potential, develop and implement a successful business strategy, improve the robustness of its products, improve its customer service, and drive change in the business. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause Capstone's actual results to be materially different from any future results expressed or implied in such statements. Such factors include, but are not limited to: 1) Market acceptance and trends; 2) The ability to enhance the quality and reliability of Capstone's products; 3) The limited operating history characterized by net losses; 4) The abilities of new management to effect beneficial changes; 5) The ability of the Company to develop and/or retain the distribution channels necessary to support planned sales; 6) The ability of Capstone to successfully execute its production and marketing plans; and 7) 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. "Capstone Turbine Corp." is a registered trademark of Capstone Turbine Corporation. All other trademarks mentioned in this press release are the property of their respective owners. CAPSTONE TURBINE CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) December 31, March 31, 2003 2003 ------------- ------------- Assets Current Assets: Cash and cash equivalents $111,719,000 $132,584,000 Accounts receivable, net of allowance for doubtful accounts and sales returns of $508,000 at September 30, 2003 and $414,000 at March 31, 2003 2,406,000 3,748,000 Inventory 9,149,000 12,121,000 Prepaid expenses and other current assets 1,719,000 1,341,000 ------------- ------------- Total current assets 124,993,000 149,794,000 ------------- ------------- Equipment and Leasehold Improvements: Machinery, equipment, and furniture 21,136,000 23,914,000 Leasehold improvements 8,499,000 8,480,000 Molds and tooling 4,345,000 4,365,000 ------------- ------------- 33,980,000 36,759,000 Less accumulated depreciation and amortization 17,749,000 16,857,000 ------------- ------------- Total equipment and leasehold improvements, net 16,231,000 19,902,000 ------------- ------------- Non-Current Portion of Inventory 4,783,000 4,412,000 Intangible Asset, net 1,761,000 1,961,000 Other Assets 472,000 578,000 ------------- ------------- Total $148,240,000 $176,647,000 ============= ============= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $2,282,000 $2,156,000 Accrued salaries and wages 1,725,000 1,472,000 Other accrued liabilities 1,888,000 1,117,000 Accrued warranty reserve 6,725,000 6,657,000 Deferred revenue 1,077,000 1,253,000 Current portion of capital lease obligations 808,000 1,411,000 ------------- ------------- Total current liabilities 14,505,000 14,066,000 ------------- ------------- Long-Term Portion of Capital Lease Obligations 105,000 736,000 Other Long-Term Liabilities 1,185,000 1,277,000 Commitments and Contingencies -- -- Stockholders' Equity: Common stock, $.001 par value; 415,000,000 shares authorized; 83,791,753 shares issued and 83,240,545 shares outstanding at December 31, 2003; 81,700,735 shares issued and 81,248,782 shares outstanding at March 31, 2003 84,000 82,000 Additional paid-in capital 529,652,000 527,188,000 Accumulated deficit (396,238,000) (366,281,000) Less: Deferred stock compensation (540,000) -- Less: Treasury stock, at cost; 551,208 shares at December 31, 2003; 451,953 shares at March 31, 2003 (513,000) (421,000) ------------- ------------- Total stockholders' equity 132,445,000 160,568,000 ------------- ------------- Total $148,240,000 $176,647,000 ============= ============= CAPSTONE TURBINE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended December 31, 2003 2002 Revenues $ 3,251,000 $ 3,643,000 Cost of Goods Sold 6,359,000 16,049,000 Gross Loss (3,108,000) (12,406,000) Operating Expenses: Research and development 3,034,000 2,028,000 Selling, general and administrative 5,688,000 6,779,000 Impairment loss on marketing rights - - Total operating expenses 8,722,000 8,807,000 Loss from Operations (11,830,000) (21,213,000) Interest Income 302,000 574,000 Interest Expense (38,000) (90,000) Other Income (1,000) (3,000) Loss Before Income Taxes (11,567,000) (20,732,000) Provision for Income Taxes - - Net Loss $ (11,567,000) $(20,732,000) Weighted Average Common Shares Outstanding 82,705,535 80,168,807 Net Loss Per Share of Common Stock - Basic and Diluted $ (0.14) $ (0.26) Nine Months Ended December 31, 2003 2002 Revenues $ 9,730,000 $ 14,938,000 Cost of Goods Sold 17,649,000 33,981,000 Gross Loss (7,919,000) (19,043,000) Operating Expenses: Research and development 7,886,000 5,527,000 Selling, general and administrative 15,007,000 23,486,000 Impairment loss on marketing rights - 15,999,000 Total operating expenses 22,893,000 45,012,000 Loss from Operations (30,812,000) (64,055,000) Interest Income 1,011,000 2,017,000 Interest Expense (154,000) (292,000) Other Income (2,000) 5,000 Loss Before Income Taxes (29,957,000) (62,325,000) Provision for Income Taxes - - Net Loss $(29,957,000) $(62,325,000) Weighted Average Common Shares Outstanding 81,908,416 78,378,535 Net Loss Per Share of Common Stock - Basic and Diluted $ (0.37) $ (0.80) - - CAPSTONE TURBINE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended December 31, --------------------------- 2003 2002 ------------- ------------- Cash Flows from Operating Activities: Net loss $(29,957,000) $(62,325,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 4,747,000 6,808,000 Impairment loss on fixed assets and manufacturing license -- 5,016,000 Impairment loss on marketing rights -- 15,999,000 Provision for doubtful accounts and sales returns 280,000 90,000 Inventory write-down (recovery) (313,000) 4,321,000 Provision for warranty expenses 3,454,000 5,328,000 Loss on disposal of equipment 243,000 65,000 Non-employee stock compensation 74,000 -- Employee and director stock compensation 462,000 759,000 Changes in operating assets and liabilities: Accounts receivable 1,062,000 167,000 Inventory 2,914,000 331,000 Prepaid expenses and other current assets (378,000) (1,027,000) Other assets -- 100,000 Accounts payable 126,000 1,543,000 Accrued salaries and wages and deferred compensation 227,000 791,000 Other accrued liabilities 705,000 867,000 Accrued warranty reserve (3,386,000) (3,098,000) Deferred revenue (176,000) (653,000) ------------- ------------- Net cash used in operating activities (19,916,000) (24,918,000) ------------- ------------- Cash Flows from Investing Activities: Acquisition of and deposits on fixed assets (1,111,000) (2,121,000) Proceeds from disposal of fixed assets 26,000 -- ------------- ------------- Net cash used in investing activities (1,085,000) (2,121,000) ------------- ------------- Cash Flows from Financing Activities: Repayment of capital lease obligations (1,162,000) (994,000) Exercise of stock options and employee stock purchases 1,390,000 200,000 Net proceeds from issuance of common stock -- 3,985,000 Purchase of treasury stock (92,000) (206,000) ------------- ------------- Net cash provided by financing activities 136,000 2,985,000 ------------- ------------- Net Decrease in Cash and Cash Equivalents (20,865,000) (24,054,000) Cash and Cash Equivalents, Beginning of Period 132,584,000 164,364,000 ------------- ------------- Cash and Cash Equivalents, End of Period $111,719,000 $140,310,000 ============= ============= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest $154,000 $292,000 Income taxes $ -- $ -- CONTACT: Capstone Turbine Corporation, Chatsworth, Calif. Investor Media: Alice Barsoomian, 818-734-5428 General Media: Keith Field, 818-734-5465