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SEC Comment Letter for FUELCELL ENERGY INC (FCEL, FCELB) (CIK 0000886128) (FCEL) — Jun 16, 2006

FUELCELL ENERGY INC (FCEL, FCELB) (CIK 0000886128)
Date: June 16, 2006 · CIK: 0000886128 · Accession: 0000000000-06-028337

AI Filing Summary & Sentiment

File numbers found in text: 001-14204

Date
May 25, 2006
Author
Kate Tillan
Form
UPLOAD
Company
FUELCELL ENERGY INC (FCEL, FCELB) (CIK 0000886128)

Letter

Mail Stop 6010 May 25, 2006 VIA U.S. MAIL AND FACSIMILE 203.462.7599 Mr. Joseph G. Mahler Senior Vice President and Chief Financial Officer FuelCell Energy Inc. 3 Great Pasture Road Danbury, Connecticut 06813

Re: FuelCell Energy Inc. Form 10-K for the Year Ended October 31, 2005 Filed January 17, 2006 File No. 001-14204

Dear Mr. Mahler:

We have reviewed your response dated May 5, 2006 and filing and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewing this information, we may raise additional comments.

Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.

Joseph G. Mahler FuelCell Energy Inc. May 25, 2006 Page 2 Form 10-K for the Year Ended October 31, 2005

Financial Statements

Consolidated Balance Sheets, page 67

Note 12. Shareholders’ Equity, page 85

1. Please refer to prior comment 4. Please respond to the following comments with respect to your Series 1 pref erred shares of subsidiary:

⋅ Please disclose in future filings the significant term s of the dividend payments. For example, in your re sponse you state that, at your option, you may pay the dividends and accrued in terest in cash or common shares. You also state that the shares issuab le may be unregistered. Please also disclose how you determine the number of shares so issuable, similar to your response. ⋅ We note from your response that you are accreting the discount on the Series 1 preferred stock under SAB Topi c 3(c), Question 1. You state that the “mandatory redemption amount for the Series 1 Preferred shares is Cdn., $25.0 million.” While we noted no discussion of a mandatory redemption requirement for the preferre d stock in your disclosure, if the stock is mandatorily redeemable then please provide us with you analysis of this instrument under SFAS 150. If the instrument is not mandatorily redeemable, please provide us with y our analysis of th e instrument under EITF Topic D-98 for any conditional rede mption features. Include in that analysis both your classification and measurement of the instrument. ⋅ We note your response, including the lis t of five factors on page 11 of your response that you considered in determining that you should account for the preferred shares of subsidiary as shares of your stock and dividends on those shares as your dividends. While you acknowledge that GAAP requires preferred stock in subsidiari es that is not held by the parent company to be accounted for as a minor ity interest, you believe that these factors override that conclusion in GAAP and should be considered since the substance of the transaction is di fferent than its form. Please provide us with additional information about your analysis of each of those factors and why each factor represents a unique circumstance that is not contemplated by and consistent with the classification and accounting for those shares under Rule 5-02.27. Include any additional accounting literature that you relied upon in analysis.

Joseph G. Mahler FuelCell Energy Inc. May 25, 2006 Page 3

Draft Amendment No.1 to Form 10-Q for th e Quarterly Period Ended January 31, 2006

Consolidated Balance Sheets, page 3

2. We note that the amounts for redeemable preferred stock, additional paid-in capital and total shareholders ’ equity have been revised to reflect the correction of an error in the classification of your Se ries B preferred stock. As such, the column heading for each period should be properly labeled to reflect that the amounts are revised from your previo usly filed financial statements.

3. Please tell us and disclose how you are va luing the redeemable preferred stock. Refer to paragraphs 15 – 16 of EITF D-98. In this regard, we note that the net proceeds from the sale of the preferred shares was $99 million based upon the disclosure on page 85 of your October 31, 2005 Form 10-K. Please tell us how the value of the preferred shares wa s accreted to the redemption value of $105,875,000 and where the accretion is reflected in your determination of the net loss to common shareholders. Refer to paragraph 18 of EITF Topic D-98.

Note 1. Summary of Significant Accounting Policies, page 6

Reclassification of Series B Cumulative Convertible Perpetual Preferred Stock, page 7

4. Please disclose the events which constitute a fundamental change. For example, we note that the termination of trad ing of shares of common stock is a fundamental change. Your current disclo sure states that the redemption may only occur upon a “fundamental change in control.” Please clarify.

Joseph G. Mahler FuelCell Energy Inc. May 25, 2006 Page 4

As appropriate, please respond to these co mments within 10 business days or tell us when you will provide us with a response. Pl ease furnish a cover letter that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing your amendmen t and responses to our comments.

You may contact Julie Sherman, Staf f Accountant, at 202.551.3640 or me at 202.551.3604 if you have any questions. You may also contact Angela Crane, Branch Chief, at 202.551.3554.

Sincerely,
Kate Tillan
Assistant Chief Accountant

Show Raw Text
Mail Stop 6010
May 25, 2006

VIA U.S. MAIL AND FACSIMILE 203.462.7599

Mr. Joseph G. Mahler
Senior Vice President and Chief Financial Officer
FuelCell Energy Inc.
3 Great Pasture Road
Danbury, Connecticut 06813

Re: FuelCell Energy Inc.
  Form 10-K for the Year Ended October 31, 2005
Filed January 17, 2006
File No. 001-14204

Dear Mr. Mahler:

We have reviewed your response dated May 5, 2006 and filing and have the
following comments.  In some of our comments, we may ask you to provide us with
information so we may better understand your  disclosure.  After reviewing this
information, we may raise additional comments.

 Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing.  We look forward to  working with you in these respects.  We
welcome any questions you may have about our comments or any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.

Joseph G. Mahler
FuelCell Energy Inc.
May 25, 2006 Page 2
Form 10-K for the Year Ended October 31, 2005

Financial Statements

Consolidated Balance Sheets, page 67

Note 12. Shareholders’ Equity, page 85

1. Please refer to prior comment 4.  Please respond to the following comments with
respect to your Series 1 pref erred shares of subsidiary:

⋅ Please disclose in future filings the significant term s of the dividend
payments.  For example, in your re sponse you state that, at your option,
you may pay the dividends and accrued in terest in cash or common shares.
You also state that the shares issuab le may be unregistered.  Please also
disclose how you determine the number of shares so issuable, similar to your response.
⋅ We note from your response that you are accreting the discount on the
Series 1 preferred stock under SAB Topi c 3(c), Question 1.  You state that
the “mandatory redemption amount for the Series 1 Preferred shares is
Cdn., $25.0 million.”  While we noted no discussion of a mandatory redemption requirement for the preferre d stock in your disclosure, if the
stock is mandatorily redeemable then please provide us with you analysis
of this instrument under SFAS 150.  If the instrument is not mandatorily
redeemable, please provide us with y our analysis of th e instrument under
EITF Topic D-98 for any conditional rede mption features.  Include in that
analysis both your classification and measurement of the instrument.
⋅ We note your response, including the lis t of five factors on page 11 of
your response that you considered in  determining that you should account
for the preferred shares of subsidiary as shares of your stock and dividends on those shares as your dividends.  While you acknowledge that GAAP requires preferred stock in subsidiari es that is not held by the parent
company to be accounted for as a minor ity interest, you believe that these
factors override that conclusion in GAAP and should be considered since the substance of the transaction is di fferent than its form.  Please provide
us with additional information about your analysis of each of those factors and why each factor represents a unique circumstance that is not
contemplated by and consistent with the classification and accounting for
those shares under Rule 5-02.27.  Include any additional accounting literature that you relied upon in analysis.

Joseph G. Mahler
FuelCell Energy Inc.
May 25, 2006 Page 3

Draft Amendment No.1 to Form 10-Q for th e Quarterly Period Ended January 31, 2006

Consolidated Balance Sheets, page 3

2. We note that the amounts for redeemable  preferred stock, additional paid-in
capital and total shareholders ’ equity have been revised to reflect the correction of
an error in the classification of your Se ries B preferred stock.  As such, the
column heading for each period should be  properly labeled to reflect that the
amounts are revised from your previo usly filed financial statements.

3. Please tell us and disclose how you are va luing the redeemable preferred stock.
Refer to paragraphs 15 – 16 of EITF D-98.  In this regard, we note that the net
proceeds from the sale of the preferred shares was $99 million based upon the disclosure on page 85 of your October 31, 2005 Form 10-K.  Please tell us how
the value of the preferred shares wa s accreted to the redemption value of
$105,875,000 and where the accretion is reflected in your determination of the net loss to common shareholders.  Refer to paragraph 18 of EITF Topic D-98.

Note 1. Summary of Significant Accounting Policies, page 6

Reclassification of Series B Cumulative Convertible Perpetual Preferred Stock, page 7

4. Please disclose the events which constitute a fundamental change.  For example, we note that the termination of trad ing of shares of common stock is a
fundamental change.  Your current disclo sure states that the redemption may only
occur upon a “fundamental change in control.”  Please clarify.

Joseph G. Mahler
FuelCell Energy Inc.
May 25, 2006 Page 4

As appropriate, please respond to these co mments within 10 business days or tell
us when you will provide us with a response.  Pl ease furnish a cover letter that keys your
responses to our comments and provides any requested information.  Detailed cover
letters greatly facilitate our review.  Please understand that we may have additional comments after reviewing your amendmen t and responses to our comments.

 You may contact Julie Sherman, Staf f Accountant, at 202.551.3640 or me at
202.551.3604 if you have any questions.  You may also contact Angela Crane, Branch
Chief, at 202.551.3554.

Sincerely,

Kate Tillan
Assistant Chief Accountant