Exhibit 99.1 Capstone Turbine Announces Fiscal-Year 2005 Results CHATSWORTH, Calif.--(BUSINESS WIRE)--July 6, 2005--Capstone Turbine Corporation(R) (Nasdaq:CPST) (www.microturbine.com) reported results for its fiscal year 2005 in its Form 10-K filed with the Securities and Exchange Commission on June 29, 2005. "We are pleased with the progress we made in fiscal 2005 to build Capstone," said John Tucker, President and CEO of Capstone. "A year ago, we developed our strategic plan for transitioning Capstone into a cash flow positive and profitable company. In the first year of executing on that plan, we made progress in all of our identified initiatives. Focusing our marketing efforts and growing business in our targeted markets was one key element of the plan. The growth in orders, with fiscal 2005 orders more than 190% of the order rate recorded in fiscal 2004, demonstrates our initial success in penetrating these targeted markets. This success came in part from our work to rationalize our channels and to create a more tailored approach to the targeted markets. In fiscal 2005, approximately 90% of our sales were still generated by our distributors and dealers." Tucker continued, "A key enabling factor to our market success came from the improvements we made in our product robustness. As a result of these improvements, we are more confident today that customers' applications of Capstone MicroTurbines(R) will produce positive performance for their businesses. The improvements also resulted in an ability to lower our standard warranty costs by one-third for new sales. We are very pleased that more than 9 million operating hours have been accumulated for Capstone MicroTurbines. We look forward to the continuing growth in the run-time hours for our products." In announcing Capstone's expanded fuel capabilities for its C60 microturbines, Tucker said, "We believe the additions we have made to the operating fuels for our model C60 microturbines, gaseous propane and compress natural gas, and our expected introduction of a C60 biogas model in late fall of this year, will provide even greater appeal to our target markets." "Our success has come in part from our expanded market presence," said Tony Hynes, Vice President of Sales and Service for Capstone. "In fiscal 2005, we opened a field service office in Japan to support our distributors and end users in that region. We also opened sales and service offices in New York and Italy. Our Italian office, which serves as our European headquarters, has already reported orders for fiscal year 2006 of more than 7 megawatts. This represents roughly the same level of business in Europe, in just over three months in fiscal 2006, as Capstone has received from Europe since its first sales of microturbines in 1998. We are delighted at the success our regional presence has delivered." Further, Hynes announced, "As a result of the success we have had with our local presence, we are opening Capstone Mexico and are exploring the possibility of an office in Boston. Our new office in New York has already produced 2.4 megawatts of new orders since it opened in December 2004. We believe our prospects are very strong for continuing business growth in the Northeastern United States." Year-to-date orders in fiscal 2006 reported by Capstone were 9.8 megawatts and backlog as of July 6th stands at 17.1 megawatts. "This level represents more megawatts in backlog today than Capstone shipped in all of fiscal 2005," said Tucker. "The investments we made in building our business in fiscal 2005 are already paying off in fiscal 2006. With our tremendous early successes in fiscal 2006, we are closing in on our targeted sales level for the year. We expect that further changes we are making in the business, such as our new National Sales Representative agreement with WESCO Distribution that we announced earlier today, and additional developments we expect to announce soon, will provide us even more momentum in our targeted markets." In summarizing Capstone's revisit of its three-year strategic plan, Tucker said, "We reconfirmed our target markets of CHP/CCHP, Resource Recovery, Power Reliability and Remote Power when we revisited our strategic plan. Our approach to our distribution channels, combining sales through distributors and dealers, as well as direct sales and lead generation by sales representatives, was also reaffirmed. Our goals for fiscal 2006 include doubling our sales as compared with fiscal 2005, reaching a positive gross margin and reducing our cash burn. We continue to target reaching cash flow positive in our fiscal year 2007 that ends March 31, 2007." Capstone's financial highlights for fiscal 2005 included sales of $17.0 million, up $4.4 million from $12.6 million reported for fiscal 2004. The majority of the increase in sales reflected higher demand for the Company's C60 model microturbines. Backlog at the end of fiscal 2005 was 10.8 megawatts, reflecting backlog at the beginning of the year of 6.5 megawatts, orders during the period of 20.8 megawatts and shipments of 16.5 megawatts. The reported gross loss was $6.9 million for fiscal 2005, an improvement of $9.9 million from the $16.8 million loss reported in fiscal 2004. Lower warranty costs accounted for the change between periods. Operating expenses were $34.2 million for the year, up $2.1 million from the prior year. The higher spending resulted primarily from higher consulting costs for Sarbanes-Oxley compliance work, information technology systems developments and market development activities. Capstone's net loss was $39.4 million, an improvement of $8.3 million from the $47.7 million loss reported in fiscal 2004. Fiscal 2005's reported net loss was $0.47 per share as compared with $0.58 a year earlier. Cash usage in the fiscal year was $38.8 million, an increase of $8.6 million from fiscal year's cash usage of $30.2 million. The higher cash usage was largely attributable to cash used for inventory purchases in the current year as opposed to cash sources from inventory reductions in the prior year. Cash and cash equivalents at the end of the year were $63.6 million. Conference Call The Company will host a conference call today, Wednesday, July 6, at 2:00 p.m. Pacific Time. Access to the live broadcast and a replay of the webcast will be available for 90-days through the Company's website: www.microturbine.com. About Capstone Turbine Capstone Turbine Corporation(R) (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 energy products utilizing microturbine technology, the result of more than ten years of focused research. Capstone Turbine has shipped more than 3,000 Capstone MicroTurbine(R) systems to customers worldwide. These award-winning systems have logged more than 9 million hours of documented operation. An ISO 9001:2000 certified company, Capstone Turbine is headquartered in the Los Angeles area with sales and/or service centers in New York, Milan and Tokyo. "Capstone Turbine Corporation" and "Capstone MicroTurbine" are registered trademarks of Capstone Turbine Corporation. All other trademarks mentioned are the property of their respective owners. This press release contains "forward-looking statements," as that term is used in the federal securities laws, about Capstone's business, with regard to, among other items, expectations of reaching cash flow positive or positive gross margin, reducing cash usage, increasing sales, penetrating target markets, the success of customers' applications, and expected results from Capstone's sales offices. Forward-looking statements may be identified by words such as "believe," "expects," "objective," "intend," "targeted," "plan," "on track" and similar phrases. 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. Many of these risks and uncertainties are described in our periodic filings with the Securities and Exchange Commission. Capstone cautions readers not to place undue reliance on these forward-looking 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 CORPORATION CONSOLIDATED BALANCE SHEETS March 31, March 31, 2005 2004 ------------- ------------- Assets Current Assets: Cash and cash equivalents $63,593,000 $102,380,000 Accounts receivable, net of allowance for doubtful accounts and sales returns of $536,000 in 2005 and $479,000 in 2004 3,150,000 4,170,000 Inventory 11,273,000 7,893,000 Prepaid expenses and other current assets 912,000 1,099,000 Assets held for sale 80,000 -- ------------- ------------- Total current assets 79,008,000 115,542,000 ------------- ------------- Equipment and Leasehold Improvements: Machinery, equipment and furniture 18,760,000 20,877,000 Leasehold improvements 8,563,000 8,499,000 Molds and tooling 3,096,000 4,363,000 ------------- ------------- 30,419,000 33,739,000 Less accumulated depreciation and amortization 19,890,000 18,718,000 ------------- ------------- Total equipment and leasehold improvements 10,529,000 15,021,000 Non-Current Portion of Inventory 3,990,000 3,936,000 Intangible Asset, net 1,427,000 1,694,000 Other Assets 236,000 352,000 ------------- ------------- Total $95,190,000 $136,545,000 ============= ============= Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $3,324,000 $2,790,000 Accrued salaries and wages 1,442,000 1,664,000 Other accrued liabilities 2,472,000 2,043,000 Accrued warranty reserve 8,667,000 11,695,000 Deferred revenue 1,522,000 1,166,000 Current portion of notes payable and capital lease obligations 19,000 582,000 ------------- ------------- Total current liabilities 17,446,000 19,940,000 ------------- ------------- Long-Term Portion of Note Payable and Capital Lease Obligations 64,000 13,000 Other Long-Term Liabilities 1,002,000 1,149,000 Commitments and Contingencies -- -- Stockholders' Equity: Preferred stock, $.001 par value; 10,000,000 shares authorized; none issued -- -- Common stock, $.001 par value; 415,000,000 shares authorized; 85,379,446 shares issued and 84,828,238 shares outstanding at March 31, 2005; 85,025,817 shares issued and 84,474,609 shares outstanding at March 31, 2004 85,000 85,000 Additional paid-in capital 530,931,000 530,394,000 Accumulated deficit (453,469,000) (414,020,000) Less deferred stock compensation (356,000) (503,000) Less treasury stock, at cost; 551,208 shares in 2005 and 2004 (513,000) (513,000) ------------- ------------- Total stockholders' equity 76,678,000 115,443,000 ------------- ------------- Total $95,190,000 $136,545,000 ============= ============= CAPSTONE TURBINE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Three Years Ended Months March 31, Ended Year Ended --------------------------- March 31, December 31, 2005 2004 2003 2002 ------------- ------------- ------------ ------------- Net Revenues $16,968,000 $12,607,000 $2,782,000 $19,529,000 Cost of Goods Sold 23,908,000 29,385,000 4,956,000 41,530,000 ------------- ------------- ------------ ------------- Gross Loss (6,940,000) (16,778,000) (2,174,000) (22,001,000) Operating Expenses: Research and development 11,761,000 11,221,000 1,006,000 6,966,000 Selling, general and administrative 22,419,000 20,840,000 4,821,000 31,846,000 Impairment loss on marketing rights -- -- -- 15,999,000 ------------- ------------- ------------ ------------- Total operating costs and expenses 34,180,000 32,061,000 5,827,000 54,811,000 ------------- ------------- ------------ ------------- Loss from Operations (41,120,000) (48,839,000) (8,001,000) (76,812,000) Interest Income 1,338,000 1,284,000 439,000 2,840,000 Interest Expense (37,000) (183,000) (73,000) (407,000) Other Income, net 372,000 1,000 2,000 26,000 ------------- ------------- ------------ ------------- Loss Before Income Taxes (39,447,000) (47,737,000) (7,633,000) (74,353,000) Provision for Income Taxes 2,000 2,000 2,000 2,000 ------------- ------------- ------------ ------------- Net Loss $(39,449,000) $(47,739,000) $(7,635,000) $(74,355,000) ============= ============= ============ ============= Net Loss Per Share of Common Stock -- Basic and Diluted $(0.47) $(0.58) $(0.09) $(0.95) ============= ============= ============ ============= Weighted Average Common Shares Outstanding 84,377,794 82,348,711 81,410,614 78,130,795 ============= ============= ============ ============= CAPSTONE TURBINE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended Year Ended March 31, March 31, 2005 2004 ------------- ------------- Cash Flows from Operating Activities: Net loss $(39,449,000) $(47,739,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,181,000 6,180,000 Non-cash reversal of administrative expenses -- -- Impairment loss on fixed assets and manufacturing license 614,000 -- Impairment loss on marketing rights -- -- Provision for doubtful accounts and returns 57,000 280,000 Inventory write-down 744,000 931,000 (Benefit) provision for warranty expenses (682,000) 9,749,000 Loss on disposal of fixed assets 24,000 315,000 Non-employee stock compensation 129,000 92,000 Employee and director stock compensation 251,000 528,000 Changes in operating assets and liabilities: Accounts receivable 963,000 (509,000) Inventory (4,062,000) 3,871,000 Prepaid expenses and other assets 187,000 258,000 Accounts payable 534,000 440,000 Accrued salaries and wages and other accrued and long term liabilities 60,000 890,000 Accrued warranty reserve (2,346,000) (4,551,000) Deferred revenue 356,000 (247,000) ------------- ------------- Net cash used in operating activities (37,439,000) (29,512,000) ------------- ------------- Cash Flows from Investing Activities: Acquisition of and deposits on equipment and leasehold improvements (1,057,000) (1,299,000) Proceeds from sale of equipment 3,000 28,000 ------------- ------------- Net cash used in investing activities (1,054,000) (1,271,000) ------------- ------------- Cash Flows from Financing Activities: Repayment of capital lease obligations (598,000) (1,415,000) Exercise of stock options, restricted stock award and employee stock purchases 304,000 2,086,000 Purchase of treasury stock -- (92,000) Net proceeds from issuance of common stock -- -- ------------- ------------- Net cash provided by (used in) financing activities (294,000) 579,000 ------------- ------------- Net Decrease in Cash and Cash Equivalents (38,787,000) (30,204,000) Cash and Cash Equivalents, Beginning of Year 102,380,000 132,584,000 ------------- ------------- Cash and Cash Equivalents, End of Year $63,593,000 $102,380,000 ============= ============= Supplemental Disclosures of Cash Flow Information Cash paid during the year for: Interest $35,000 $183,000 Income taxes $2,000 $2,000 Three Months Ended Year Ended March 31, December 31, 2003 2002 ------------- ------------- Cash Flows from Operating Activities: Net loss $(7,635,000) $(74,355,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,573,000 9,891,000 Non-cash reversal of administrative expenses (1,099,000) Impairment loss on fixed assets and manufacturing license -- 5,016,000 Impairment loss on marketing rights -- 15,999,000 Provision for doubtful accounts and returns 220,000 215,000 Inventory write-down 243,000 4,793,000 (Benefit) provision for warranty expenses 385,000 6,175,000 Loss on disposal of fixed assets -- 102,000 Non-employee stock compensation 4,000 -- Employee and director stock compensation 210,000 1,024,000 Changes in operating assets and liabilities: Accounts receivable 732,000 2,907,000 Inventory (967,000) 1,272,000 Prepaid expenses and other assets 990,000 (1,202,000) Accounts payable (873,000) 830,000 Accrued salaries and wages and other accrued and long term liabilities (580,000) 683,000 Accrued warranty reserve (634,000) (3,406,000) Deferred revenue 512,000 (737,000) ------------- ------------- Net cash used in operating activities (6,919,000) (30,793,000) ------------- ------------- Cash Flows from Investing Activities: Acquisition of and deposits on equipment and leasehold improvements (271,000) (2,515,000) Proceeds from sale of equipment -- -- ------------- ------------- Net cash used in investing activities (271,000) (2,515,000) ------------- ------------- Cash Flows from Financing Activities: Repayment of capital lease obligations (343,000) (1,309,000) Exercise of stock options, restricted stock award and employee stock purchases 22,000 280,000 Purchase of treasury stock (215,000) (206,000) Net proceeds from issuance of common stock -- 3,985,000 ------------- ------------- Net cash provided by (used in) financing activities (536,000) 2,750,000 ------------- ------------- Net Decrease in Cash and Cash Equivalents (7,726,000) (30,558,000) Cash and Cash Equivalents, Beginning of Year 140,310,000 170,868,000 ------------- ------------- Cash and Cash Equivalents, End of Year $132,584,000 $140,310,000 ============= ============= Supplemental Disclosures of Cash Flow Information Cash paid during the year for: Interest $73,000 $407,000 Income taxes $2,000 $2,000 CONTACT: Capstone Turbine Corporation General Media Inquiries: Keith Field, 818-734-5465 Investor and Investment Media Inquiries: Cindy Martinez, 818-407-3643 (Investor Info.)