XML 69 R8.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Nature of Business, Basis of Presentation and Significant Accounting Policies | 12 Months Ended
--- | ---
Oct. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract] |
Nature of Business, Basis of Presentation and Significant Accounting Policies | Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies Nature of Business and Basis of Presentation FuelCell Energy, Inc., together with its subsidiaries (the “Company”, “FuelCell Energy”, “we”, “us”, or “our”) is a leading integrated fuel cell company with a growing global presence in delivering environmentally-responsible distributed baseload power solutions through our proprietary, molten-carbonate fuel cell technology. We develop turn-key distributed power generation solutions and operate and provide comprehensive service for the life of the power plant. We are working to expand the proprietary technologies that we have developed over the past five decades into new products, markets and geographies. Our mission and purpose remains to utilize our proprietary, state-of-the-art fuel cell power plants to reduce the global environmental footprint of baseload power generation by providing environmentally responsible solutions for reliable electrical power, hot water, steam, chilling, hydrogen, micro-grid applications, and carbon capture. The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. On May 8, 2019, the Company effected a 1-for-12 reverse stock split, reducing the number of the Company’s common shares outstanding on that date from 183,411,230 shares to 15,284,269 shares. The number of authorized shares of common stock remained unchanged at 225,000,000 shares and the number of authorized shares of preferred stock remained unchanged at 250,000 shares. Additionally, the conversion rate of our Series B Preferred Stock (as defined elsewhere herein), the conversion price of our Series C Preferred Stock and Series D Preferred Stock (each as defined elsewhere herein), the exchange price of our Series 1 Preferred Shares (as defined elsewhere herein), the exercise price of all then outstanding options and warrants, and the number of shares reserved for future issuance pursuant to our equity compensation plans were all adjusted proportionately in connection with the reverse stock split. All share and per share amounts and conversion prices presented herein have been adjusted retroactively to reflect these changes. Certain reclassifications have been made to the prior year amounts to conform to the presentation for fiscal year 2019. The Company adopted Financial Accounting Standards Board Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) effective November 1, 2018 and applied the modified retrospective transition method. As a result of the adoption of Topic 606, Unbilled receivables has been reclassified as a separate line item from Accounts receivable, net on the Consolidated Balance Sheets and Unbilled receivables has been classified as a separate item from Accounts receivable, net in the Consolidated Statement of Cash Flows for the fiscal year ended October 31, 2018 and 2017. Liquidity The Company faced significant liquidity challenges in fiscal 2019, which were addressed through a series of actions late in the fiscal year and subsequent to fiscal year end. In the second and third quarters of fiscal 2019, management concluded that, as a result of the Company’s history of negative cash flows from operating and investing activities, negative working capital, aged accounts payable, forbearance agreements with suppliers, and significant short-term debt maturities, there was substantial doubt about the Company’s ability to continue as a going concern. To address these issues, we restructured our management team and our operations in ways that are intended to support our growth and achieve our profitability and sustainability goals. We raised capital under our at-the-market sales plan, which allowed us to pay down our accounts payable and stay current on our forbearance agreements. In addition, we repaid a substantial portion of our short-term debt, retired our Series C and Series D Preferred Stock obligations, entered into new or amended financing arrangements and entered into a license arrangement with EMRE, which resulted in $10.0 million of up-front proceeds. While some of the indicators of substantial doubt still exist, such as historical losses and negative cash flows, as a result of the previous actions taken by the Company in response to the liquidity challenges that arose in the second and third quarters of fiscal 2019, management has concluded that substantial doubt was alleviated and the Company expects to meet its obligations for at least one year from the date of issuance of these financial statements. Key definitive agreements which support the Company’s future liquidity position include:
| • | On October 31, 2019, the Company and certain of its subsidiaries as guarantors entered into a $200.0 million senior secured credit facility with Orion Energy Partners Investment Agent, LLC, as Administrative Agent and Collateral Agent (the “Agent”), and its affiliates, Orion Energy Credit Opportunities Fund II, L.P., Orion Energy Credit Opportunities Fund II GPFA, L.P., and Orion Energy Credit Opportunities Fund II PV, L.P., as lenders (the “Orion Facility”). The Orion Facility is structured as a delayed draw term loan to be provided by the lenders. In conjunction with the closing of the Orion Facility, on October 31, 2019, the Company drew down $14.5 million (the “Initial Funding”). The Company drew down an additional $65.5 million on November 22, 2019 (the “Second Funding”). The Company may draw the remainder of the Orion Facility, $120.0 million, over the first 18 months following the Initial Funding and subject to the Agent’s approval to fund: (i) construction costs, inventory and other capital expenditures of additional fuel cell projects with contracted cash flows (under PPAs with creditworthy counterparties) that meet or exceed a mutually agreed coverage ratio; and (ii) inventory, working capital, and other costs that may be required to be delivered by the Company on purchase orders, service agreements, or other binding customer agreements with creditworthy counterparties.
| • | On November 5, 2019, the Company signed a two-year Joint Development Agreement (“JDA”) with EMRE, pursuant to which the Company will continue exclusive research and development efforts with EMRE to evaluate and develop new and/or improved carbonate fuel cells to reduce carbon dioxide emissions from industrial and power sources, in exchange for (a) payment of (i) an exclusivity and technology access fee of $5.0 million, (ii) up to $45.0 million for research and development efforts, and (iii) milestone-based payments of up to $10.0 million after certain technological milestones are met, and (b) certain licenses.
| • | As of October 31, 2019, FCE Ltd. or the Company, as the guarantor of FCE Ltd.’s payment obligations with respect to the Series 1 Preferred Shares, was obligated to pay, on or before December 31, 2020, all accrued and unpaid dividends on the Series 1 Preferred Shares and the balance of the principal redemption price with respect to all of the Series 1 Preferred Shares. Interest under the Series 1 Preferred Shares accrued at annual rate of 5%. In addition, the holder of the Series 1 Preferred Shares had the right to exchange such shares for fully paid and non-assessable shares of common stock of the Company at certain specified prices, and FCE Ltd. had the option of making dividend payments in the form of common stock of the Company or cash. As of October 31, 2019, the Company did not have sufficient shares available to satisfy these obligations. On January 20, 2020, the Company, FCE Ltd. and Enbridge entered into a letter agreement (the “January 2020 Letter Agreement”), pursuant to which they agreed to amend the articles of FCE Ltd. relating to and setting forth the terms of the Series 1 Preferred Shares to: (i) remove the provisions of the articles permitting or requiring the issuance of shares of the Company’s common stock in exchange for the Series 1 Preferred Shares or as payment of amounts due to the holders of the Series 1 Preferred Shares, (ii) remove certain provisions of the articles relating to the redemption of the Series 1 Preferred Shares, (iii) increase the annual dividend rate, commencing on January 1, 2020, to 15%, (iv) extend the final payment date for all accrued and unpaid dividends and all return of capital payments (i.e., payments of the principal redemption price) from December 31, 2020 to December 31, 2021, (v) clarify when dividend and return of capital payments are to be made in the future and extend the quarterly dividend and return of capital payments through December 31, 2021 (which were previously to be paid each quarter through December 31, 2020), (vi) remove certain terms and provisions of the articles that are no longer applicable, and (vii) make other conforming changes to the articles.
The Company’s future liquidity will be dependent on its ability to (i) timely complete current projects in process within budget, including approved amounts that have been financed as financing does not cover overages, (ii) increase cash flows from its generation portfolio, including by meeting conditions required to timely commence operations of new projects and operating its generation portfolio in compliance with minimum performance guarantees, (iii) obtain approval of and receive funding for project construction under the Orion Facility and meet conditions for release of funds, (iv) increase order and contract volumes, which would lead to additional product sales and services agreements, (v) obtain funding for and receive payment for research and development under current and future Advanced Technology contracts, including achieving a $5 million technological performance milestone in the JDA during calendar year 2020, and (vi) implement the cost reductions necessary to achieve profitable operations. Our business model requires substantial outside financing arrangements and satisfaction of the conditions of such financing arrangements to deploy our projects and facilitate the growth of our business. If financing is not available to us on acceptable terms if and when needed, if we do not satisfy the conditions of our financing arrangements or if we spend more than the financing approved for projects, we may be required to reduce planned spending, sell assets, seek alternative financing and take other measures, which could have a material adverse effect on our operations. As of January 14, 2020, we had 14,034,001 shares of common stock available for issuance, of which 10,290,934 shares were reserved for issuance under various convertible securities, options, and warrants, under our stock purchase and incentive plans, and under our at-the-market sales plan. The limited number of shares available for issuance limits our ability to raise capital in the equity markets and satisfy obligations with shares instead of cash, which could adversely impact our ability to fund our business and operations. We must obtain stockholder approval to increase the number of shares of common stock we are authorized to issue under our Certificate of Incorporation. At the April 4, 2019 annual meeting of stockholders, our stockholders did not approve our request to increase the number of shares of common stock that we are authorized to issue from 225,000,000 shares to 335,000,000 shares. In the event that the Company’s Board of Directors determines to seek stockholder approval for an increase in authorized shares in the future, there can be no assurances of obtaining such stockholder approval. While there can be no assurances, we anticipate raising additional required capital from new and existing investors and lenders. We expect to work with lenders and financial institutions to secure long-term debt, tax equity and sale-leasebacks for our project asset portfolio as we achieve the Commercial Operation Dates for these projects. This financing, if received, may allow the Company to recycle capital from these projects by reinvesting the capital in other projects and to pay down the Orion Facility over time. It should be noted that the lenders and the Agent under the Orion Credit Agreement (“Orion”) have broad approval rights over our ability to draw and allocate funds from the Orion Facility. There can be no assurance that the Company can obtain such financing or that the Company can obtain such financing on terms acceptable to the Company. If the Company is unable to obtain such financing or raise additional capital, the Company may reduce its expenditures or slow its project spending. If the Company cannot obtain such financing or cannot obtain such financing on terms acceptable to the Company, it would negatively impact the Company’s business model, operations, and liquidity. We believe that our cash flows from our existing backlog, including PPAs, service agreements and Advanced Technology contracts, combined with our current unrestricted cash and cash equivalents, cash which is expected to become unrestricted, and available borrowings under the Orion Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months. Significant Accounting Policies Cash and Cash Equivalents and Restricted Cash All cash equivalents consist of investments in money market funds with original maturities of three months or less at date of acquisition. We place our temporary cash investments with high credit quality financial institutions. As of October 31, 2019, $30.3 million of cash and cash equivalents was pledged as collateral for letters of credit and for certain banking requirements and contractual commitments, compared to $40.9 million pledged as of October 31, 2018. The restricted cash balance as of October 31, 2018 included $15.0 million, which secured certain obligations of the Company under a 15-year service agreement for the Bridgeport Fuel Cell Park project and was classified as long-term. In connection with the acquisition of the Bridgeport Fuel Cell Project, $15.0 million of restricted cash was released on May 9, 2019. The restricted cash balance as of October 31, 2019 and 2018 also includes $17.9 million and $17.7 million, respectively, to support obligations related to the PNC sale-leaseback transactions. As of October 31, 2019 and 2018, we had outstanding letters of credit of $5.7 million and $3.8 million, respectively, which expire on various dates through August 2025. Inventories and Advance Payments to Vendors Inventories consist principally of raw materials and work-in-process. Cost is determined using the first-in, first-out cost method. In certain circumstances, we will make advance payments to vendors for future inventory deliveries. These advance payments are recorded as Other current assets on the Consolidated Balance Sheets. Inventories are reviewed to determine if valuation allowances are required for excess quantities or obsolescence. This review includes analyzing inventory levels of individual parts considering the current design of our products and production requirements as well as the expected inventory requirements for maintenance on installed power plants. Project Assets Project assets consist of capitalized costs for fuel cell projects in various stages of development, whereby we have entered into power purchase agreements (“PPAs”) prior to entering into a definitive sales or long-term financing agreement for the project, capitalized costs for fuel cell projects which are the subject of a sale-leaseback transaction with PNC Energy Capital, LLC (“PNC”), projects in development for which we expect to secure long-term contracts or projects retained by the Company under a merchant model. Project asset costs include costs for developing and constructing a complete turn-key fuel cell project. Development costs can include legal, consulting, permitting, interconnect, and other similar costs. To the extent we enter into a definitive sales agreement, we expense project assets to cost of sales after the respective project asset is sold to a customer and all revenue recognition criteria have been met. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation which is recorded based on the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized on the straight-line method over the shorter of the estimated useful lives of the assets or the term of the lease. When property is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations for the period. Goodwill and Intangible Assets Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business combination and is reviewed for impairment at least annually. Accounting Standards Codification Topic 350, "Intangibles - Goodwill and Other" (“ASC 350”) permits the assessment of qualitative factors to determine whether events and circumstances lead to the conclusion that it is necessary to perform the two-step goodwill impairment test required under ASC 350. The Company completed its annual impairment analysis of goodwill and the in-process research & development assets (“IPR&D”) as of July 31, 2019 and 2018. The goodwill and IPR&D asset are both held by the Company’s Versa Power Systems, Inc. (“Versa”) reporting unit. Goodwill and the IPR&D asset are also reviewed for possible impairment whenever changes in conditions indicate that the fair value of a reporting unit or IPR&D asset is more likely than not below its carrying value. No impairment charges were recorded during the fiscal years ended October 31, 2019, 2018 and 2017. Impairment of Long-Lived Assets (including Project Assets) Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable, we compare the carrying amount of an asset group to future undiscounted net cash flows, excluding interest costs, expected to be generated by the asset group and their ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Revenue Recognition (Including Lease Agreements and Royalty Income) Refer to Note 2. “Revenue Recognition” for information on the Company’s revenue recognition accounting policy which is effective for the fiscal year ended October 31, 2019 upon adoption of ASU 2014-09, “Revenue from Contracts with Customers.” The revenue recognition policy for fiscal years ended October 31, 2018 and 2017 was as follows: The Company earned revenue from (i) the sale and installation of fuel cell power plants including site engineering and construction services, (ii) the sale of completed project assets, (iii) equipment only sales (modules, balance of plants (“BOP”), component part kits and spare parts to customers), (iv) performance under long-term service agreements, (v) the sale of electricity and other value streams under power purchase agreements (“PPAs”) and utility tariffs from project assets retained by the Company, (vi) license fees and royalty income from manufacturing and technology transfer agreements, and (vii) government and customer-sponsored Advanced Technologies projects. As further clarification, revenue elements are classified as follows: Product. Includes the sale of completed project assets, the sale and installation of fuel cell power plants including site engineering and construction services, and, the sale of component part kits, modules, BOPs and spare parts to customers. Service and license. Includes performance under long-term service agreements for power plants owned by third parties and license fees and royalty income from manufacturing and technology transfer agreements. Generation. Includes the sale of electricity under PPAs and utility tariffs from project assets retained by the Company. This also includes revenue received from the sale of other value streams from these assets including the sale of heat, steam and renewable energy credits. Advanced Technologies. Includes revenue from customer-sponsored and government-sponsored Advanced Technologies projects. The Company’s revenue is generated from customers located throughout the U.S., Europe and Asia and from agencies of the U.S. government. For customer contracts where the Company is responsible for the supply of equipment and site construction (full turn-key construction project) and has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total contract costs, revenue is recognized under the percentage of completion method of accounting. The use of percentage of completion accounting requires significant judgment relative to estimating total contract costs, including assumptions relative to the length of time to complete the contract, the nature and complexity of the work to be performed and total project costs. Our estimates are based upon the professional knowledge and experience of our engineers, project managers and other personnel, who review each long-term contract on a quarterly basis to assess the contract’s schedule, performance, technical matters and estimated cost at completion. When changes in estimated contract costs are identified, such revisions may result in current period adjustments to operations applicable to performance in prior periods. Revenues are recognized based on the percentage of the contract value that incurred costs to date as compared to estimated total contract costs, after giving effect to estimates of costs to complete based on most recent information. For customer contracts for new or significantly customized products, where management does not believe it has the ability to reasonably estimate total contract costs, revenue is recognized using the completed contract method and therefore all revenue and costs for the contract are deferred and not recognized until installation and acceptance of the power plant is complete. We recognize anticipated contract losses as soon as they become known and estimable. Actual results could vary from initial estimates and estimates will be updated as conditions change. Revenue from equipment only sales where the Company does not have the obligations associated with overall construction of the project (modules, BOPs, fuel cell kits and spare parts sales) was recognized upon shipment or title transfer under the terms of the customer contract. Terms for certain contracts provide for a transfer of title and risk of loss to our customers at our factory locations and certain key suppliers upon completion of our contractual requirement to produce products and prepare the products for shipment. A shipment in place may occur in the event that the customer is not ready to take delivery of the products on the contractually specified delivery dates. In June 2017, an EPC contractor, Hanyang Industrial Development Co., Ltd (“HYD”), was awarded a 20 MW project by a utility in South Korea (Korea Southern Power Company) utilizing the Company’s SureSource technology. The Company was able to participate on this Korean project pursuant to a Memorandum of Understanding (“MOU”) with POSCO Energy that permitted the Company access to the Asian fuel cell market, including the sale of SureSource solutions in South Korea. Effective July 15, 2018, the MOU was terminated. On August 29, 2017, the Company entered into a contract with HYD pursuant to which the Company provided equipment to HYD for this 20 MW fuel cell project as well as ancillary services including plant commissioning. Construction began in the fall of 2017 and the installation became operational in the summer of 2018. The value of the contract to the Company was $70 million. The Company assessed the contract using the multi-element revenue recognition guidance and determined that each of the modules and BOPs as well as the ancillary services each represented separate deliverables with stand-alone value. The full contract value was allocated to each element based on estimated selling prices using cost plus expected margins and revenue recognition occurred upon completion of shipping and customer acceptance of each piece of equipment and the proportional performance method was used for the ancillary services provided. Approximately $39 million of revenue was recognized in the fourth quarter of fiscal 2017 related to this contract and approximately $31 million was recognized during fiscal year 2018. Revenue from service agreements was generally recorded ratably over the term of the service agreement, as the Company’s performance of routine monitoring and maintenance under these service agreements is generally expected to be incurred on a straight-line basis. For service agreements where the Company expects to have module exchanges at some point during the term (generally service agreements in excess of five years), the costs of performance are not expected to be incurred on a straight-line basis, and therefore, a portion of the initial contract value related to the module exchange(s) is deferred and is recognized upon such module replacement event(s). The Company recognized license fees and other revenue over the term of the associated agreement. The Company records license fees and royalty income from POSCO Energy as a result of manufacturing and technology transfer agreements entered into in 2007, 2009 and 2012. The manufacturing and technology transfer agreements the Company entered into with POSCO Energy collectively provide them with the rights to manufacture SureSource power plants in South Korea and exclusive rights to sell in Asia. Under PPAs and project assets retained by the Company, revenue from the sale of electricity and other value streams are recognized as electricity is provided to customers. These revenues are classified as generation revenues. Advanced Technologies contracts are entered into with both private industry and government entities. Revenue from most government sponsored Advanced Technologies projects is recognized as direct costs are incurred plus allowable overhead less cost share requirements, if any. Revenue from fixed price Advanced Technologies projects is recognized using percentage of completion accounting. Advanced Technologies programs are often multi-year projects or structured in phases with subsequent phases dependent on reaching certain milestones prior to additional funding being authorized. Government contracts are typically structured with cost-reimbursement and/or cost-shared type contracts or cooperative agreements. We are reimbursed for reasonable and allocable costs up to the reimbursement limits set by the contract or cooperative agreement, and on certain contracts we are reimbursed only a portion of the costs incurred. Sale-Leaseback Accounting The Company, through a wholly-owned subsidiary, has entered into sale-leaseback transactions for commissioned project assets where we have entered into a PPA with a customer who is both the site host and end user of the power. Due to the Company's continuing involvement with the project and the projects being considered integral equipment, sale accounting is precluded by ASC 840-40, “Leases”. Accordingly, the Company uses the financing method to account for these transactions. Under the financing method of accounting for a sale-leaseback, the Company does not recognize as income any of the sale proceeds received from the lessor that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are accounted for as financing obligations and leaseback payments made by the Company are allocated between interest expense and a reduction to the financing obligation. Interest on the financing obligation is calculated using the Company’s incremental borrowing rate at the inception of the arrangement on the outstanding financing obligation. While we receive financing for the full value of the related power plant asset, we have not recognized revenue on the sale-leaseback transaction. Instead, revenue is recognized through the sale of electricity and energy credits which are generated as energy is produced. The sale-leaseback arrangements with PNC allow the Company to repurchase the project assets at fair market value. Warranty and Service Expense Recognition We warranty our products for a specific period of time against manufacturing or performance defects. Our U.S. warranty is limited to a term generally 15 months after shipment or 12 months after acceptance of our products. We accrue for estimated future warranty costs based on historical experience. We also provide for a specific accrual if there is a known issue requiring repair during the warranty period. Estimates used to record warranty accruals are updated as we gain further operating experience. As of October 31, 2019 and 2018, the warranty accrual, which is classified as an Accrued liability on the Consolidated Balance Sheets, totaled $0.1 million. In addition to the standard product warranty, we have entered into service agreements with certain customers to provide monitoring, maintenance and repair services for fuel cell power plants. Under the terms of these service agreements, the power plant must meet a minimum operating output during the term. If minimum output falls below the contract requirement, we may be subject to performance penalties or may be required to repair and/or replace the customer's fuel cell module. The Company has accrued for performance guarantees of $0.8 million and $1.1 million as of October 31, 2019 and 2018, respectively. Refer to Note 2. “Revenue Recognition” for the change in accounting effective as of November 1, 2019 relating to performance guarantees. The Company records loss accruals for service agreements when the estimated cost of future module exchanges and maintenance and monitoring activities exceeds the remaining unrecognized contract value. Estimates for future costs on service agreements are determined by a number of factors including the estimated remaining life of the module, used replacement modules available and future operating plans for the power plant. Our estimates are performed on a contract by contract basis and include cost assumptions based on what we anticipate the service requirements will be to fulfill obligations for each contract. As of October 31, 2019, our loss accruals on service agreements totaled $3.3 million compared to $0.9 million as of October 31, 2018. At the end of our service agreements, customers are expected to either renew the service agreement or based on the Company's rights to title of the module, the module will be returned to the Company as the plant is no longer being maintained. As of October 31, 2019, the Company had $1.0 million related to the residual value of replacement modules in power plants under service agreements compared to $1.2 million as of October 31, 2018. Research and Development Costs We perform both customer-sponsored research and development projects based on contractual agreement with customers and company-sponsored research and development projects. Costs incurred for customer-sponsored projects include manufacturing and engineering labor, applicable overhead expenses, materials to build and test prototype units and other costs associated with customer-sponsored research and development contracts. Costs incurred for customer-sponsored projects are recorded as cost of Advanced Technologies contract revenues in the Consolidated Statements of Operations. Costs incurred for company-sponsored research and development projects consist primarily of labor, overhead, materials to build and test prototype units and consulting fees. These costs are recorded as research and development expenses in the consolidated statements of operations. Concentrations We contract with a concentrated number of customers for the sale of our products, for service agreement contracts and for Advanced Technologies contracts. For the years ended October 31, 2019, 2018 and 2017, our top customers accounted for 80%, 86% and 79%, respectively, of our total annual consolidated revenue. The percent of consolidated revenues from each customer for the years ended October 31, 2019, 2018 and 2017, respectively, are presented below.
|  | 2019 |  |  | 2018 |  |  | 2017 |
ExxonMobil Research and Engineering Company (EMRE) |  |  | 40 | % |  |  | 6 | % |  |  | 9 | %
Dominion Bridgeport Fuel Cell, LLC |  |  | 13 | % |  |  | 3 | % |  |  | 11 | %
Connecticut Light and Power |  |  | 11 | % |  |  | — | % |  |  | — | %
U.S. Department of Energy (DOE) |  |  | 6 | % |  |  | 8 | % |  |  | 9 | %
Pfizer, Inc. |  |  | 6 | % |  |  | 4 | % |  |  | 4 | %
POSCO Energy |  |  | 3 | % |  |  | 5 | % |  |  | 6 | %
Clearway Energy (formerly NRG Yield, Inc.) |  |  | 1 | % |  |  | 15 | % |  |  | — | %
Hanyang Industrial Development Co., Ltd. (HYD) |  |  | — | % |  |  | 35 | % |  |  | 40 | %
AEP Onsite Partners, LLC |  |  | — | % |  |  | 10 | % |  |  | — | %
Total |  |  | 80 | % |  |  | 86 | % |  |  | 79 | %
Derivatives We do not use derivatives for speculative or trading purposes. Our derivative instruments include embedded derivatives in our Series 1 Preferred Shares. Changes in fair value are recorded to Other income, net on the Consolidated Statements of Operations. Refer to Note 15. “Redeemable Preferred Stock” for additional information. The Company also has an interest rate swap that is adjusted to fair value on a quarterly basis. The fair value adjustment is based on Level 2 inputs including primarily the forward LIBOR curve available to swap dealers. The fair value methodology involves comparison of (i) the sum of the present value of all monthly variable rate payments based on a reset rate using the forward LIBOR curve and (ii) the sum of the present value of all monthly fixed rate payments on the notional amount which is equivalent to the outstanding principal amount of the loan. Refer to Note 13. “Debt” for further details. 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 and obsolete inventories, product warranty costs, accruals for service agreements, allowance for uncollectible receivables, depreciation and amortization, impairment of goodwill, indefinite-lived intangible assets and long-lived assets, valuation of derivatives, income 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. Foreign Currency Translation The translation of the financial statements of FCE Korea Ltd., FCES GmbH and Versa Power Systems Ltd. results in translation gains or losses, which are recorded in accumulated other comprehensive loss within stockholders’ equity. Our Canadian subsidiary, FCE FuelCell Energy, Ltd., is financially and operationally integrated and the functional currency is the U.S. dollar. We are also subject to foreign currency transaction gains and losses as certain transactions are denominated in foreign currencies. We recognized net foreign currency transaction (losses) gains of $(0.1) million, $0.3 million and $(0.7) million for the years ended October 31, 2019, 2018 and 2017, respectively. These amounts have been included in Other income, net in the Consolidated Statements of Operations. Recently Adopted Accounting Guidance In May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The adoption of Topic 606 by the Company on November 1, 2018 using the modified retrospective transition method resulted in a cumulative effect adjustment that increased Accumulated deficit by $6.7 million. In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which provides for a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The Company early adopted this ASU effective November 1, 2018. The adoption of this ASU did not have an impact on the Company’s consolidated financial statements. Recent Accounting Guidance Not Yet Effective In February 2016, the FASB issued ASU 2016-02, “Leases” that amends the accounting and disclosure requirements for leases. The new guidance requires that a lessee shall recognize a right-of-use (“ROU”) asset and a corresponding lease liability, initially measured at the present value of the lease payments, in its balance sheet. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the Consolidated Statements of Operations. The Company was required to adopt the new guidance on November 1, 2019. In July 2018, the FASB issued an amendment to the new leasing standard which provides an alternative transition method that allows companies to recognize a cumulative effect adjustment to the opening balance sheet upon adoption. The Company intends to elect this alternative transition method and forgo the adjustments to comparative-period financial information. The Company has both operating and capital leases (refer to Note 20. “Commitments and Contingencies”) as well as sale-leaseback transactions that are accounted for under the finance method. The new standard provides entities with several practical expedient elections. Among them, the Company intends to elect the package of practical expedients that permits the Company to not reassess prior conclusions related to its leasing arrangements, lease classifications and initial direct costs. In addition, the Company plans to elect the practical expedients to not separate lease and non-lease components, to use hindsight in determining the lease terms and impairment of ROU assets, and to not apply the new standard’s recognition requirements to short-term leases or use the portfolio approach to a group of leases with similar characteristics. Upon adoption of this ASU, the Company will record ROU assets and the present value of its lease liabilities which are currently not recognized on its Consolidated Balance Sheet. The Company is in the process of implementing changes to its business processes, systems and controls to support the new lease standard and its disclosure requirements. On adoption, the Company expects to recognize a lease liability of approximately $10.3 million and corresponding ROU assets of approximately $10.1 million. Any cumulative effect of the adoption recorded to accumulated deficit is not expected to be significant. The Company also does not expect there to be a significant net effect on the Consolidated Statements of Operations, however, what was previously presented as rent expense related to operating leases will be recognized as interest expense on the Company’s minimum lease obligation and depreciation of right-of-use asset.

X
- References No definition available. + Details
Name: | us-gaap_OrganizationConsolidationAndPresentationOfFinancialStatementsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -URI http://asc.fasb.org/topic&trid=2122394 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_OrganizationConsolidationBasisOfPresentationBusinessDescriptionAndAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration