Capstone Turbine Announces Preliminary Third-Quarter Results; Company Schedules Third-Quarter Earnings Release and Conference Call.

Business Editors

CHATSWORTH, Calif.--(BUSINESS WIRE)--Oct. 9, 2001

Capstone Turbine Corp. (Nasdaq:CPST), a leading producer of low-emission microturbine systems, today announced preliminary financial results for the third quarter ended Sept. 30, 2001.

For the third quarter, the company shipped 80 units (62 30kw systems and 18 60kw systems) and expects to report revenue in the range of $3.2 million to $3.4 million and post a loss per share of between $0.16 and $0.18.

Capstone anticipates that it will have a negative gross margin of approximately $2.1 million for the third quarter, primarily attributable to factory overhead costs being allocated over a fewer number of units compared with the first and second quarters of 2001. The company's cash burn rate is expected to be approximately $19 million for the quarter, attributable to an inventory build-up due to slower-than-anticipated sales.

Dr. Ake Almgren, president and chief executive officer of Capstone Turbine Corp., said: "On August 22, we announced that we had substantially lowered our expectations for sales during the third quarter, in part because during a period of economic slowdown some customers appeared to be weighing more heavily the capital investment required to achieve the benefits our microturbines offer.

"We had previously reported that a large portion of our sales for the second quarter occurred during the latter part of that quarter. Shipments during the month of September were lower than originally expected. We have over $180 million in cash and equivalents on hand, so we believe we have sufficient financial resources to weather a significant downturn in the economy while continuing to execute our business plan.

"We are carefully managing our cost structure to reflect the current environment, while prudently increasing our investments in sales and marketing activities and maintaining an appropriate level of research and development expenditures with the goal of effectively positioning the company to seek substantial growth. We believe interest in microturbines remains high."

Capstone also announced that it will hold a conference call to discuss its third-quarter financial results on Thursday, Oct. 25, 2001, at 4:30 p.m. Eastern/1:30 p.m. Pacific. Members of the public are invited to listen to the live call via the Internet. To hear the call, simply log on at the company's Web site at www.microturbine.com and go to the Investor Relations Web page. Financial results will be released over the news wires after the market closes on Thursday, Oct. 25, 2001.

About Capstone Turbine

Capstone Turbine Corp. (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 10 years of focused research. Capstone Turbine has shipped more than 1,700 commercial production Capstone MicroTurbine systems to customers worldwide. These award-winning systems have logged more than 1 million hours of commercial operation serving, among others, the following applications:

-- Hybrid electric vehicles (HEVs): onboard generation

-- Resource recovery: converting oilfield, landfill and sewage waste gases into
electricity

-- Micro-cogeneration: combined heat/power/chilling solutions

-- The 9s market: power quality and reliability

Certain statements contained in this release may be deemed to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, and Capstone Turbine Corporation intends that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements relate to: 1) Capstone's penetration of its target markets; 2) the emergence of additional markets for microturbines; 3) demand for microturbines and the ability of the Company to ship its 60-kilowatt systems; 4) the Company's development of additional microturbine product releases. Capstone cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements herein. Such factors include, but are not limited to: 1) market acceptance of Capstone's technology and products; 2) the size, timing and shipment of individual orders; 3) the ability of Capstone to successfully execute its production and marketing plans; 4) the Company's ability to develop additional microturbine product releases; 5) the Company's ability to successfully develop its recuperator core manufacturing processes and expand production capacity; 6) being able to secure adequate supplies of acceptable quality components or experiencing higher than anticipated costs; 7) exposure to product liability or other tort claims; 8) the Company's ability to control its warranty exposure; 9) the Company's ability to retain key management and technical personnel; 10) barriers to entry in the marketplace or regulations that may affect the Company's ability to sell its products; 11) the Company's ability to protect its intellectual property or if the Company is found to have infringed upon the intellectual property of others; 12) the Company's ability to operate in a highly competitive market against competitors who have significantly greater resources; and 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.