Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data, Unaudited)
Note 1—General
Nature of Business
Clean Energy Fuels Corp., together with its majority and wholly owned subsidiaries (hereinafter collectively referred to as the “Company,” unless the context or the use of the term indicates otherwise), is engaged in the business of selling natural gas as an alternative fuel for vehicle fleets and related natural gas fueling solutions to its customers, primarily in the United States and Canada.
The Company's principal business is supplying compressed natural gas (“CNG”), liquefied natural gas (“LNG”) and renewable natural gas that can be delivered in the form of CNG or LNG ("RNG") for light, medium and heavy-duty vehicles and providing operation and maintenance ("O&M") services for natural gas fueling stations. As a comprehensive solution provider, the Company also designs, builds, operates, and maintains fueling stations; manufactures, sells and services non-lubricated natural gas fueling compressors and other equipment used in CNG stations and LNG stations; offers assessment, design and modification solutions to provide operators with code-compliant service and maintenance facilities for natural gas vehicle fleets; transports and sells CNG and LNG to industrial and institutional energy users who do not have direct access to natural gas pipelines; processes and sells RNG; sells tradable credits it generates by selling natural gas and RNG as a vehicle fuel, including credits under the California and the Oregon Low Carbon Fuel Standards (collectively, "LCFS Credits") and Renewable Identification Numbers ("RIN Credits" or "RINs") under the federal Renewable Fuel Standard Phase 2; helps its customers acquire and finance natural gas vehicles; and obtains federal, state and local tax credits, grants and incentives.
Basis of Presentation
The accompanying interim unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial position, results of operations, comprehensive loss and cash flows as of and for the
three and nine
months ended
September 30, 2015
and
2016
. All intercompany accounts and transactions have been eliminated in consolidation. The
three and nine
month periods ended
September 30, 2015
and
2016
are not necessarily indicative of the results to be expected for the year ending
December 31, 2016
or for any other interim period or for any future year.
Certain information and disclosures normally included in the notes to the financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), but the resultant disclosures contained herein are in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) as they apply to interim reporting. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended
December 31, 2015
that are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 3, 2016.
Reclassifications
Certain prior period items and amounts, including certain line items in accrued liabilities in Note 9 and in the condensed consolidated statement of cash flows, have been reclassified to conform to the classifications used to prepare the consolidated financial statements for the period ended
September 30, 2016
. These reclassifications had no material impact on the Company’s financial position, results of operations, or cash flows as previously reported.
During the three months ended March 31, 2016, the Company adopted Accounting Standards Update ("ASU") No. 2015-03,
Interest - Imputation of Interest
, which requires that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related liability, rather than as a deferred charge. The standard is required to be applied on a retrospective basis. As a result of applying the standard, unamortized debt issuance costs of
$273
were reclassified from Prepaid expenses and other current assets to Current portion of long-term debt and capital lease obligations and
$4,991
were reclassified from Notes receivable and other long-term assets to Long-term debt and capital lease obligations as of December 31, 2015.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates and may result in material effects on the Company’s operating results and financial position.
Revenue Recognition
Beginning January 1, 2016, the Company began using the percentage of completion method to recognize revenue for station construction projects using the cost-to-cost method. Under this method, the Company estimates the percentage of completion of a project based on the costs incurred to date for the associated contract in comparison to the estimated total costs for such contract at completion. Historically, the Company recognized revenue on station construction projects using the completed-contract method because it did not have a reliable means to make estimates of the percentage of the contract
completed. Under the completed contract method, the construction projects were considered substantially complete at the earlier of customer acceptance of the fueling station or the time when fuel dispensing activities at the station began. The sale of compressors and related equipment continues to be recognized under the percentage of completion method as in previous periods.
Effective January 1, 2016, the Company implemented a cost tracking system that provides for a detailed tracking of costs incurred on its station construction projects on a project by project basis. The Company also changed related accounting activities and processes to timely identify and monitor costs. As a result of this implementation, the Company is able to make reliable estimates as to the percentage of a project that is complete at the end of each reporting period.
Station construction contracts are generally short-term, except for certain larger and more complex stations, which can take up to
24 months
to complete. Management evaluates the performance of contracts on an individual contract basis. Contract price and cost estimates are reviewed periodically as work progresses and adjustments proportionate to the percentage of completion are reflected in contract revenues in the reporting period when such estimates are revised.
The nature of accounting for contracts is such that refinements of estimates to account for changing conditions and new developments are continuous and characteristic of the process. Many factors that can affect contract profitability may change during the performance period of a contract, including differing site conditions, the availability of skilled contract labor, the performance of major suppliers and subcontractors, and unexpected changes in material costs. Changes to these factors may result in revisions to costs and income, which are recognized in the period in which the revisions become known. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses become known. During the
nine
months ended
September 30, 2016
, there were
no
significant losses on open contracts.
The Company considers unapproved change orders to be contract variations for which the customer has approved the change of scope but an agreement has not been reached as to an associated price change. Change orders that are unapproved as to both price and scope are evaluated as claims. Claims have historically been insignificant. There were no significant unapproved change orders, claims, contract penalties, settlements or changes in contract estimates during the
nine
months ended
September 30, 2016
.
As a result of using the percentage of completion method to recognize revenues, revenue and operating income from station construction sales during the three months ended
September 30, 2016
were lower by
$3,764
and
$310
, respectively, than would have been recognized during the period under the completed contract method. There was no impact on the income per diluted share. During the
nine
months ended
September 30, 2016
, revenue and operating income from station construction sales were higher by
$14,083
and
$1,864
, respectively, than would have been recognized during the period under the completed contract method. Income per diluted share was
$0.02
higher than what would have been reported.
Note
2
— Investments in Other Entities and Noncontrolling Interest in a Subsidiary
MCEP
On September 16, 2014, the Company formed a joint venture with Mansfield Ventures LLC (“Mansfield”) called Mansfield Clean Energy Partners LLC (“MCEP”), which is designed to provide natural gas fueling solutions to bulk fuel haulers in the United States. The Company and Mansfield each have a
50%
ownership interest in MCEP. The Company accounts for its interest using the equity method of accounting, as the Company has the ability to exercise significant influence over MCEP’s operations. The Company recorded a loss from this investment of
$154
and
$13
for the
three months ended September 30,
2015
and
2016
, respectively. The Company recorded a loss from this investment of
$703
and
$20
for the
nine months ended September 30,
2015
and
2016
, respectively. Additionally, during the
nine months ended September 30,
2016
, the Company received a return of capital of
$3,031
with no change in ownership interest. The Company has an investment balance of $
4,695
and
$1,644
at
December 31, 2015
and
September 30, 2016
, respectively.
NG Advantage
On October 14, 2014, the Company entered into a Common Unit Purchase Agreement (“UPA”) with NG Advantage, LLC (“NG Advantage”) for a
53.3%
controlling interest in NG Advantage. NG Advantage is engaged in the business of transporting CNG in high-capacity trailers to large industrial and institutional energy users, such as hospitals, food processors, manufacturers and paper mills, that do not have direct access to natural gas pipelines.
The Company viewed the acquisition as a strategic investment in the expansion of the Company’s initiative to deliver natural gas to industrial and institutional energy users. The results of NG Advantage’s operations have been included in the Company’s consolidated financial statements since October 14, 2014.
The Company recorded a loss from the noncontrolling interest of
$62
and
$391
for the
three months ended September 30,
2015
and
2016
, respectively and
$835
and
$1,317
for the
nine months ended September 30,
2015
and
2016
, respectively. The noncontrolling interest was
$26,393
and
$25,076
at December 31, 2015 and
September 30, 2016
, respectively.
Note 3—Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less on the date of acquisition to be cash equivalents. The Company places its cash and cash equivalents with high credit quality financial institutions.
At times, such investments may be in excess of the Federal Deposit Insurance Corporation (“FDIC”), Canadian Deposit Insurance Corporation (“CDIC”) and other foreign insurance limits. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. The amounts in excess of FDIC, CDIC and other foreign insurance limits were approximately
$40,691
and
$39,306
at
December 31, 2015
and
September 30, 2016
, respectively.
Note 4—Restricted Cash
The Company classifies restricted cash as short-term and a current asset if the cash is expected to be used in operations within a year or to acquire a current asset. Otherwise, the restricted cash is classified as long-term. Short-term restricted cash at
December 31, 2015
and
September 30, 2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
September 30,
2016
|
Short-term restricted cash:
|
|
|
|
|
|
Standby letters of credit
|
$
|
1,631
|
|
|
$
|
1,753
|
|
Canton Bonds (see Note 10)
|
2,609
|
|
|
2,876
|
|
Total short-term restricted cash
|
$
|
4,240
|
|
|
$
|
4,629
|
|
Note
5
—Investments
Available-for-sale securities are carried at fair value, inclusive of unrealized gains and losses. Unrealized gains and losses are included in other comprehensive income (loss) net of applicable income taxes. Gains or losses on sales of available-for-sale securities are recognized on the specific identification basis. All of the Company’s short-term investments are classified as available-for-sale securities.
The Company reviews available-for-sale securities for other-than-temporary declines in fair value below their cost basis each quarter and whenever events or changes in circumstances indicate that the cost basis of an asset may not be recoverable. This evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below its cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the security. As of
September 30, 2016
, the Company believes its carrying values for its available-for-sale securities are properly recorded.
Short-term investments at
December 31, 2015
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized
Losses
|
|
Estimated Fair
Value
|
Municipal bonds and notes
|
$
|
16,797
|
|
|
$
|
(7
|
)
|
|
$
|
16,790
|
|
Zero coupon bonds
|
500
|
|
|
(1
|
)
|
|
499
|
|
Corporate bonds
|
37,181
|
|
|
(77
|
)
|
|
37,104
|
|
Certificate of deposits
|
48,551
|
|
|
—
|
|
|
48,551
|
|
Total short-term investments
|
$
|
103,029
|
|
|
$
|
(85
|
)
|
|
$
|
102,944
|
|
Short-term investments at
September 30, 2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized
Gains (Losses)
|
|
Estimated Fair
Value
|
Municipal bonds and notes
|
$
|
14,466
|
|
|
$
|
(4
|
)
|
|
$
|
14,462
|
|
Zero coupon bonds
|
429
|
|
|
—
|
|
|
429
|
|
Corporate bonds
|
15,736
|
|
|
(14
|
)
|
|
15,722
|
|
Certificate of deposits
|
46,700
|
|
|
—
|
|
|
46,700
|
|
Total short-term investments
|
$
|
77,331
|
|
|
$
|
(18
|
)
|
|
$
|
77,313
|
|
Note 6—Other Receivables
Other receivables at
December 31, 2015
and
September 30, 2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
September 30,
2016
|
Loans to customers to finance vehicle purchases
|
$
|
10,531
|
|
|
$
|
9,070
|
|
Accrued customer billings
|
7,106
|
|
|
9,985
|
|
Fuel tax credits
|
40,730
|
|
|
6,275
|
|
Other
|
2,300
|
|
|
3,234
|
|
Total other receivables
|
$
|
60,667
|
|
|
$
|
28,564
|
|
Note 7—Inventory
Inventory consists of raw materials and spare parts, work in process and finished goods and is stated at the lower of cost (first-in, first-out) or market. The Company writes down the carrying value of its inventory to net realizable value for estimated obsolescence or unmarketable inventory in an amount equal to the difference between the cost of inventory and its estimated realizable value based upon assumptions about future demand and market conditions, among other factors.
Inventories at
December 31, 2015
and
September 30, 2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
September 30,
2016
|
Raw materials and spare parts
|
$
|
25,113
|
|
|
$
|
23,941
|
|
Work in process
|
973
|
|
|
2,195
|
|
Finished goods
|
3,203
|
|
|
3,319
|
|
Total inventories
|
$
|
29,289
|
|
|
$
|
29,455
|
|
Note 8—Land, Property and Equipment
Land, property and equipment at
December 31, 2015
and
September 30, 2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
September 30,
2016
|
Land
|
$
|
2,858
|
|
|
$
|
2,858
|
|
LNG liquefaction plants
|
94,634
|
|
|
94,634
|
|
RNG plants
|
46,397
|
|
|
47,154
|
|
Station equipment
|
316,258
|
|
|
333,440
|
|
Trailers
|
50,414
|
|
|
51,730
|
|
Other equipment
|
83,687
|
|
|
90,762
|
|
Construction in progress
|
139,586
|
|
|
124,199
|
|
|
733,834
|
|
|
744,777
|
|
Less: accumulated depreciation
|
(217,510
|
)
|
|
(256,855
|
)
|
Total land, property and equipment
|
$
|
516,324
|
|
|
$
|
487,922
|
|
Included in land, property and equipment are capitalized software costs of
$22,886
and
$24,872
at
December 31, 2015
and
September 30, 2016
, respectively. The accumulated amortization on the capitalized software costs is
$13,793
and
$16,402
at
December 31, 2015
and
September 30, 2016
, respectively.
The Company recorded amortization expense related to the capitalized software costs of
$692
and
$824
during the three months ended
September 30, 2015
and
2016
, respectively, and
$2,239
and
$2,609
during the
nine
months ended
September 30, 2015
and
2016
, respectively.
At
September 30, 2015
and
2016
,
$6,249
and
$4,139
, respectively, are included in accounts payable and accrued liabilities balances, which amounts are related to purchases of property and equipment. These amounts are excluded from the condensed consolidated statements of cash flows as they are non-cash investing activities.
Note 9—Accrued Liabilities
Accrued liabilities at
December 31, 2015
and
September 30, 2016
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
September 30,
2016
|
Accrued alternative fuel incentives (1)
|
$
|
15,651
|
|
|
$
|
12,653
|
|
Accrued employee benefits
|
3,042
|
|
|
3,534
|
|
Accrued interest
|
3,718
|
|
|
4,952
|
|
Accrued gas and equipment purchases
|
14,133
|
|
|
12,126
|
|
Accrued property and other taxes
|
5,344
|
|
|
3,850
|
|
Salaries and wages
|
9,537
|
|
|
9,478
|
|
Other
|
7,657
|
|
|
7,674
|
|
Total accrued liabilities
|
$
|
59,082
|
|
|
$
|
54,267
|
|
(1) Included in these balances are federal alternative fuels tax credit ("VETC") (discussed in Note 17 below) and tradable credits related to renewable identification numbers ("RIN Credits") and low carbon fuel standards ("LCFS Credits") payable to third parties.
Note
10
—Debt
Debt and capital lease obligations at
December 31, 2015
and
September 30, 2016
consisted of the following and are further discussed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Principal Balances
|
|
Unamortized Debt Financing Costs
|
|
Balance, Net of Financing Costs
|
7.5% Notes(1)
|
$
|
150,000
|
|
|
$
|
399
|
|
|
$
|
149,601
|
|
SLG Notes
|
145,000
|
|
|
38
|
|
|
144,962
|
|
5.25% Notes
|
250,000
|
|
|
3,985
|
|
|
246,015
|
|
Canton Bonds
|
10,910
|
|
|
514
|
|
|
10,396
|
|
Capital lease obligations
|
6,448
|
|
|
—
|
|
|
6,448
|
|
Other debt
|
10,056
|
|
|
328
|
|
|
9,728
|
|
Total debt and capital lease obligations
|
572,414
|
|
|
5,264
|
|
|
567,150
|
|
Less amounts due within one year
|
(150,129
|
)
|
|
(273
|
)
|
|
(149,856
|
)
|
Total long-term debt and capital lease obligations
|
$
|
422,285
|
|
|
$
|
4,991
|
|
|
$
|
417,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
Principal Balances
|
|
Unamortized Debt Financing Costs
|
|
Balance Net of Financing Costs
|
7.5% Notes(1)
|
$
|
150,000
|
|
|
$
|
304
|
|
|
$
|
149,696
|
|
5.25% Notes
|
179,600
|
|
|
2,037
|
|
|
177,563
|
|
Canton Bonds
|
9,520
|
|
|
409
|
|
|
9,111
|
|
Capital lease obligations
|
5,886
|
|
|
—
|
|
|
5,886
|
|
Other debt
|
10,535
|
|
|
171
|
|
|
10,364
|
|
Total debt and capital lease obligations
|
355,541
|
|
|
2,921
|
|
|
352,620
|
|
Less amounts due within one year
|
(5,028
|
)
|
|
(177
|
)
|
|
(4,851
|
)
|
Total long-term debt and capital lease obligations
|
$
|
350,513
|
|
|
$
|
2,744
|
|
|
$
|
347,769
|
|
(1) Included in the
7.5%
Notes is $
65,000
in principal amount held by T. Boone Pickens, which is classified as “Long-term debt, related party” on the condensed consolidated balance sheet. See the description below for additional information.
7.5%
Notes
On July 11, 2011, the Company entered into a loan agreement (the “CHK Agreement”) with Chesapeake NG Ventures Corporation (“Chesapeake”), an indirect wholly owned subsidiary of Chesapeake Energy Corporation, whereby Chesapeake agreed to purchase from the Company up to
$150,000
of debt securities pursuant to the issuance of
three
convertible promissory notes over a
three
-year period, each having a principal amount of
$50,000
(each a “CHK Note” and collectively the “CHK Notes” and, together with the CHK Agreement and other transaction documents, the “CHK Loan Documents”). The first CHK Note was issued on July 11, 2011 and the second CHK Note was issued on July 10, 2012.
On June 14, 2013 (the “Transfer Date”), T. Boone Pickens and Green Energy Investment Holdings, LLC, an affiliate of Leonard Green & Partners, L.P. (collectively, the “Buyers”), and Chesapeake entered into a note purchase agreement (“Note Purchase Agreement”) pursuant to which Chesapeake sold the outstanding CHK Notes (the “Sale”) to the Buyers. Chesapeake assigned to the Buyers all of its right, title and interest under the CHK Loan Documents (the “Assignment”), and each Buyer severally assumed all of the obligations of Chesapeake under the CHK Loan Documents arising after the Sale and the Assignment including, without limitation, the obligation to advance an additional
$50,000
to the Company in June 2013 (the “Assumption”). The Company also entered into the Note Purchase Agreement for the purpose of consenting to the Sale, the Assignment and the Assumption.
Contemporaneously with the execution of the Note Purchase Agreement, the Company entered into a loan agreement with each Buyer (collectively, the “Amended Agreements”). The Amended Agreements have the same terms as the CHK Agreement, other than changes to reflect the new holders of the CHK Notes. Immediately following execution of the Amended Agreements, the Buyers delivered
$50,000
to the Company in satisfaction of the funding requirement they had assumed from Chesapeake (the “2013 Advance”). In addition, the Company canceled the existing CHK Notes and issued replacement notes, and the Company also issued notes to the Buyers in exchange for the 2013 Advance (the replacement notes and the notes issued in exchange for the 2013 Advance are referred to herein as the “
7.5%
Notes”).
The
7.5%
Notes have the same terms as the CHK Notes, other than the changes to reflect their different holders. They bear interest at the rate of
7.5%
per annum and are convertible at the option of the holder into shares of the Company’s common stock at a conversion price of
$15.80
per share (the “
7.5%
Notes Conversion Price”). Upon written notice to the Company, each holder of a
7.5%
Note has the right to exchange all or any portion of the principal and accrued and unpaid interest under its
7.5%
Notes for shares of the Company’s common stock at the
7.5%
Notes Conversion Price.
Additionally, subject to certain restrictions, the Company can force conversion of each
7.5%
Note into shares of its common stock if, following the second anniversary of the issuance date of a
7.5%
Note, such shares trade at a
40%
premium to the
7.5%
Notes Conversion Price for at least
20
trading days in any consecutive
30
trading day period.
The entire principal balance of each
7.5%
Note is due and payable
seven years
following its issuance and the Company may repay each
7.5%
Note at maturity in shares of its common stock (with a value determined by the per share volume weighted-average price for the
20
trading days prior to the maturity date) or cash. All of the shares issuable upon conversion of the
7.5%
Notes have been registered for resale by their holders pursuant to a registration statement that has been filed with and declared effective by the Securities and Exchange Commission.
The Amended Agreements provide for customary events of default which, if any of them occurs, would permit or require the principal of, and accrued interest on, the
7.5%
Notes to become, or to be declared, due and payable. No events of default under the
7.5%
Notes had occurred as of
September 30, 2016
.
On August 27, 2013, Green Energy Investment Holdings, LLC transferred
$5,000
in principal amount of its
7.5%
Notes to certain third parties.
As a result of the foregoing transactions, (i) T. Boone Pickens holds
7.5%
Notes in the aggregate principal amount of
$65,000
, (ii) Green Energy Investment Holdings, LLC holds
7.5%
Notes in the aggregate principal amount of
$80,000
, and (iii) other third parties hold
7.5%
Notes in the aggregate principal amount of
$5,000
.
SLG Notes
On August 24, 2011, the Company entered into convertible note purchase agreements (each, an “SLG Agreement” and collectively the “SLG Agreements”) with certain purchasers (each, a “Purchaser” and collectively, the “Purchasers”), pursuant to which the Purchasers agreed to purchase from the Company
$150,000
of
7.5%
convertible promissory notes due in August 2016 (each a “SLG Note” and collectively the “SLG Notes”). The transaction closed and the SLG Notes were issued on August 30, 2011.
On March 1, 2016, and pursuant to the consent of the holders of the SLG Notes, the Company prepaid in cash an aggregate of
$60,000
in principal amount and
$1,812
in accrued and unpaid interest owed under the SLG Notes.
On July 14, 2016, the Company entered into separate privately negotiated exchange agreements with each holder of an SLG Note to exchange the outstanding principal amount of each SLG Note, totaling
$85,000
for all SLG Notes and all accrued and unpaid interest thereon, totaling
$248
for all SLG Notes, for an aggregate of
14,000,000
shares of the Company's common stock and
$38,155
in cash. The value of the shares of the Company's common stock issued to the holders of the SLG Notes in the exchange has been excluded from the Company's condensed consolidated statements of cash flows, as it is a non-cash financing activity. The Company recognized a loss of
$891
in the three months ended September 30, 2016, related to the settlement of the SLG Notes for the Company's common stock. The repurchased and exchanged SLG Notes have been terminated and canceled in full and the Company has no further obligations under the SLG Notes.
5.25%
Notes
In September 2013, the Company completed a private offering of
$250,000
in principal amount of
5.25%
Convertible Senior Notes due 2018 (the “
5.25%
Notes”) and entered into an indenture governing the
5.25%
Notes (the “Indenture”).
The net proceeds from the sale of the
5.25%
Notes after the payment of certain debt issuance costs of
$7,805
were
$242,195
. The Company has used the net proceeds from the sale of the
5.25%
Notes to fund capital expenditures and for general corporate purposes. The
5.25%
Notes bear interest at a rate of
5.25%
per annum, payable semi-annually in arrears on October 1 and April 1 of each year, beginning on April 1, 2014. The
5.25%
Notes will mature on October 1, 2018, unless purchased, redeemed or converted prior to such date in accordance with their terms and the terms of the Indenture.
Holders may convert their
5.25%
Notes, at their option, at any time prior to the close of business on the business day immediately preceding the maturity date of the
5.25%
Notes. Upon conversion, the Company will deliver a number of shares of its common stock, per $1 principal amount of
5.25%
Notes, equal to the conversion rate then in effect (together with a cash payment in lieu of any fractional shares). The initial conversion rate for the
5.25%
Notes is
64.1026
shares of the Company’s common stock per $1 principal amount of
5.25%
Notes (which is equivalent to an initial conversion price of approximately
$15.60
per share of the Company’s common stock). The conversion rate is subject to adjustment upon the occurrence of certain specified events as described in the Indenture. Upon the occurrence of certain corporate events prior to the maturity date of the
5.25%
Notes, the Company will, in certain circumstances, in addition to delivering the number of shares of the Company’s common stock deliverable upon conversion of the
5.25%
Notes based on the conversion rate then in effect (together with a cash payment in lieu of any fractional shares), pay holders that convert their
5.25%
Notes a cash make-whole payment in an amount as calculated in accordance with the Indenture. The Company may, at its option, irrevocably elect to settle its obligation to pay any such make-whole payment in shares of its common stock instead of in cash.
The amount of any make-whole payment, whether it is settled in cash or in shares of the Company’s common stock upon the Company’s election, will be determined based on the date on which the corporate event occurs or becomes effective and the stock price paid (or deemed to be paid) per share of the Company’s common stock in the corporate event, as described in the Indenture.
The Company may not redeem the
5.25%
Notes prior to October 5, 2016. On or after October 5, 2016, the Company may, at its option, redeem for cash all or any portion of the
5.25%
Notes if the closing sale price of the Company’s common stock for at least
20
trading days (whether or not consecutive) during any
30
consecutive trading day period ending on, and including, the trading day immediately preceding the date on which notice of redemption is provided, exceeds
160%
of the conversion price on each applicable trading day. In the event of the Company’s redemption of the
5.25%
Notes, the redemption price will equal
100%
of the principal amount of the
5.25%
Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
No
sinking fund is provided for in the
5.25%
Notes.
If the Company undergoes a fundamental change (as defined in the Indenture) prior to the maturity date of the
5.25%
Notes, subject to certain conditions as described in the Indenture, holders may require the Company to purchase, for cash, all or any portion of their
5.25%
Notes at a repurchase price equal to
100%
of the principal amount of the
5.25%
Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change purchase date.
The Indenture contains customary events of default with customary cure periods, including, without limitation, failure to make required payments or deliveries of shares of the Company’s common stock when due under the Indenture, failure to comply with certain covenants under the Indenture, failure to pay when due or acceleration of certain other indebtedness of the Company or certain of its subsidiaries, and certain events of bankruptcy and insolvency of the Company or certain of its subsidiaries. The occurrence of an event of default under the Indenture will allow either the trustee or the holders of at least
25%
in principal amount of the then-outstanding
5.25%
Notes to accelerate, or upon an event of default arising from certain events of bankruptcy or insolvency of the Company, will automatically cause the acceleration of, all amounts due under the
5.25%
Notes. No events of default under the
5.25%
Notes had occurred as of
September 30, 2016
.
The
5.25%
Notes are senior unsecured obligations of the Company and rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the
5.25%
Notes; equal in right of payment to the Company’s unsecured indebtedness that is not so subordinated; effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness (including trade payables) of the Company’s subsidiaries.
The Company's board of directors has authorized and approved the use of up to
$50,000
to purchase outstanding
5.25%
Notes in the open market, in accordance with the terms of the Indenture. Pursuant to this approval, during the
three and nine
months ended
September 30, 2016
, respectively, the Company paid an aggregate of $
1,180
and
$24,883
, respectively, in cash to repurchase and retire $
1,400
and
$45,400
, respectively, in aggregate principal amount of the
5.25%
Notes, together with
$28
and
$766
, respectively, in accrued and unpaid interest thereon. Additionally, pursuant to a privately negotiated exchange agreement with certain holders of the
5.25%
Notes, on May 4, 2016, the Company issued
6,265,829
shares of its common stock in exchange for an aggregate principal amount of
$25,000
of
5.25%
Notes held by such holders, together with accrued and unpaid interest thereon. The value of the shares of the Company's common stock issued to the holders of the
5.25%
Notes in the exchange has been excluded from the Company's condensed consolidated statements of cash flows as it is a non-cash financing activity. The Company's repurchase and exchange of
5.25%
Notes for the
three and nine
months ended
September 30, 2016
resulted in a total gain of
$223
and
$26,266
for such periods, respectively. All repurchased and exchanged
5.25%
Notes have been surrendered to the trustee for such notes and canceled.
PlainsCapital Bank Credit Facility
On February 29, 2016, the Company entered into a Loan and Security Agreement (“LSA”) with PlainsCapital Bank (“Plains”), pursuant to which Plains agreed to lend the Company up to
$50,000
on a revolving basis from time to time for a term of
one
year (the “Credit Facility”). All amounts advanced under the Credit Facility are due and payable on February 28, 2017. Simultaneously, the Company drew down
$50,000
under this Credit Facility, which the Company repaid in full on August 31, 2016. The Credit Facility is evidenced by a promissory note the Company issued on February 29, 2016 in favor of Plains (the “Plains Note”). Interest on the Plains Note is payable monthly and accrues at a rate equal to the greater of (i) the then-current LIBOR rate plus
2.30%
or (ii)
2.70%
. As collateral security for the prompt payment in full when due of the Company's obligations to Plains under the LSA and the Plains Note, the Company pledged to and granted Plains a security interest in all of its right, title and interest in the cash and corporate and municipal bonds rated AAA, AA or A by Standard & Poor’s Rating Services that the Company holds in an account at Plains. In connection with such pledge and security interest granted under the Credit Facility, on February 29, 2016, the Company entered into a Pledged Account Agreement with Plains and PlainsCapital Bank - Wealth Management and Trust (the “Pledge Agreement” and collectively with the LSA and the Plains Note, the “Plains Loan Documents”).The Plains Loan Documents include certain covenants of the Company and also provide for customary events of default, which, if any of them occurs, would permit or require, among other things, the principal of, and accrued interest on, the Credit Facility to become, or to be declared, due and payable. Events of default under the Plains Loan Documents include, among others, the occurrence of certain bankruptcy events, the failure to make payments when due under the Plains Note and the transfer
or disposal of the collateral under the LSA. No amounts were outstanding under the Credit Facility as of
September 30, 2016
and no events of default under the Plains Loan Documents had occurred as of
September 30, 2016
.
On October 31, 2016 the LSA was amended solely to extend the Credit Facility's maturity date from February 28, 2017 to September 30, 2018.
Canton Bonds
On March 19, 2014, Canton Renewables, LLC (“Canton”), a wholly owned subsidiary of the Company, completed the issuance of Solid Waste Facility Limited Obligation Revenue Bonds (Canton Renewables, LLC — Sauk Trail Hills Project) Series 2014 in the aggregate principal amount of
$12,400
(the “Canton Bonds”).
The Canton Bonds were issued by the Michigan Strategic Fund (the “Issuer”) and the proceeds of such issuance were loaned by the Issuer to Canton pursuant to a loan agreement that became effective on March 19, 2014 (the “Loan Agreement”). The Canton Bonds are expected to be repaid from revenue generated by Canton from the sale of RNG and are secured by the revenue and assets of Canton. The Canton Bond repayments will be amortized through July 1, 2022, the average coupon interest rate on the Canton Bonds is
6.6%
, and all but
$1,000
of the principal amount of the Canton Bonds is non-recourse to Canton’s parent companies, including the Company.
Canton used the Canton Bond proceeds primarily to (i) refinance the cost of constructing and equipping its RNG extraction and production project in Canton, Michigan and (ii) pay a portion of the costs associated with the issuance of the Canton Bonds. The refinancing described in the prior sentence was accomplished through distributions to Canton's direct and indirect parent companies who provided the financing for the RNG production facility, and such companies have used such distributions to finance construction of additional RNG extraction and processing projects and for working capital purposes.
The Loan Agreement contains customary events of default, with customary cure periods, including, without limitation, failure to make required payments when due under the Loan Agreement, failure to comply with certain covenants under the Loan Agreement, certain events of bankruptcy and insolvency of Canton, and the existence of an event of default under the indenture governing the Canton Bonds that was entered into between the Issuer and The Bank of New York Mellon Trust Company, N.A., as trustee.
The occurrence of an event of default under the Loan Agreement will allow the Issuer or the trustee to, among other things, accelerate all amounts due under the Loan Agreement. No events of default under the Loan Agreement had occurred as of
September 30, 2016
.
Other Debt
The Company has other debt due at various dates through
2023
bearing interest at rates up to
22.34%
and with a weighted average interest rate of
6.35%
and
5.11%
as of
December 31, 2015
and
September 30, 2016
, respectively.
Note
11
—Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing the net income (loss) attributable to Clean Energy Fuels Corp. by the weighted-average number of common shares outstanding and common shares issuable for little or no cash consideration during each period. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to Clean Energy Fuels Corp. by the weighted-average number of common shares outstanding and common shares issuable for little or no cash consideration and potentially dilutive securities outstanding during the period.
Potentially dilutive securities include stock options, warrants, convertible notes and restricted stock units. The dilutive effect of stock options and warrants is computed under the treasury stock method. The dilutive effect of convertible notes and restricted stock units is computed under the if-converted method. Potentially dilutive securities are excluded from the computations of diluted net income (loss) per share if their effect would be antidilutive.
At-The-Market Offering Program
On November 11, 2015, the Company entered into an equity distribution agreement with Citigroup Global Markets Inc. (“Citigroup”), as sales agent and/or principal, pursuant to which the Company may issue and sell, from time to time, through or to Citigroup shares of its common stock having an aggregate offering price of up to
$75,000
in an “at-the-market” offering program (the “ATM Program”).
On September 9, 2016, the Company entered into an amended and restated equity distribution agreement with Citigroup, which amends, restates, and replaces the original equity distribution agreement in its entirety, for the primary purpose of increasing from
$75,000
to
$110,000
, the aggregate offering price of shares of common stock available for issuance and sale thereunder in the ATM Program.
The following table summarizes the activity under the ATM Program for the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Through December 31,
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
(in 000s, except per-share amounts)
|
2015
|
|
2016
|
|
2016
|
|
Gross proceeds
|
$
|
6,943
|
|
|
$
|
16,066
|
|
|
$
|
69,113
|
|
|
Fees and issuance costs
|
$
|
493
|
|
|
386
|
|
|
1,728
|
|
|
Net proceeds
|
$
|
6,450
|
|
|
$
|
15,680
|
|
|
$
|
67,385
|
|
|
Shares issued
|
1,561,902
|
|
|
3,824,144
|
|
|
21,325,587
|
|
|
GE Warrant
On December 31, 2015, the Company terminated its credit agreement (the "Credit Agreement") with General Electric Capital Corporation ("GE") and all related documents, except for a warrant to purchase up to
1,000,000
shares of the Company's common stock (the "GE Warrant"), which remained outstanding as of
September 30, 2016
. The shares of the Company's common stock subject to the GE Warrant are included in the basic and diluted net income (loss) per share calculations, as they are issuable upon exercise of the GE Warrant.
On October 4, 2016, the holders of the GE Warrant exercised such warrant in full pursuant to the cashless exercise provisions thereof, which resulted in the Company's issuance to such holders of
997,740
shares of common stock.
The information required to compute basic and diluted net income (loss) per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
Weighted-average common shares outstanding
|
91,561,613
|
|
|
130,436,038
|
|
|
91,454,117
|
|
|
112,819,041
|
|
|
The following potentially dilutive securities have been excluded from the diluted net income (loss) per share calculations because their effect would have been antidilutive. Although such securities were antidilutive for the respective periods, they could be dilutive in the future.
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2015
|
|
2016
|
Options
|
10,707,060
|
|
|
11,582,091
|
|
Warrants
|
6,130,682
|
|
|
—
|
|
Convertible Notes
|
35,185,979
|
|
|
21,006,491
|
|
Restricted Stock Units
|
2,942,126
|
|
|
2,432,930
|
|
Note
12
—Stock-Based Compensation
The following table summarizes the compensation expense and related income tax benefit related to the Company's stock-based compensation arrangements recognized in the condensed consolidated statements of operations during the periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
Stock-based compensation expense, net of $0 tax in 2015 and 2016
|
$
|
2,656
|
|
|
$
|
2,077
|
|
|
$
|
8,009
|
|
|
$
|
6,533
|
|
|
At
September 30, 2016
, there was
$9,487
of total unrecognized compensation costs related to non-vested shares subject to outstanding stock options and restricted stock units, which is expected to be expensed over a weighted-average period of approximately
1.80
years.
Note
13
—Environmental Matters, Litigation, Claims, Commitments and Contingencies
The Company is subject to federal, state, local, and foreign environmental laws and regulations. The Company does not anticipate making any expenditures to comply with such laws and regulations that would have a material impact on the Company’s consolidated financial position, results of operations, or liquidity. The Company believes that its operations comply, in all material respects, with applicable federal, state, local and foreign environmental laws and regulations.
The Company may become party to various legal actions that arise in the ordinary course of its business. During the course of its operations, the Company is also subject to audit by tax authorities for varying periods in various federal, state, local and foreign tax jurisdictions. Disputes may arise during the course of such audits as to facts and matters of law. It is impossible to determine the ultimate liabilities that the Company may incur resulting from any such lawsuits, claims and proceedings, audits, commitments, contingencies and related matters or the timing of these liabilities, if any. If these matters were to ultimately be resolved unfavorably, an outcome not currently anticipated, it is possible that such an outcome could have a material adverse effect upon the Company’s consolidated financial position, results of operations, or liquidity. However, the Company believes that the ultimate resolution of such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.
Note
14
—Income Taxes
The Company’s income tax benefit (expense) for the
three months ended September 30,
2015
and
2016
was $
241
and
$(416)
, respectively. The Company's income tax (expense) for the
nine months ended September 30,
2015
and
2016
was
$(1,353)
and
$(1,229)
, respectively. Tax benefit (expense) for all periods was comprised of taxes due on the Company’s U.S. and foreign operations. The increase in the Company’s income tax provision for the three months ended
September 30, 2016
as compared to the income tax provision for the three months ended
September 30, 2015
was primarily attributable to an increase in the earnings of foreign subsidiaries. The decrease in the Company’s income tax provision for the
nine
months ended
September 30, 2016
as compared to the income tax provision for the
nine
months ended
September 30, 2015
was primarily attributable to a decrease in the earnings of foreign subsidiaries. The effective tax rates for the three and
nine
months ended
September 30, 2015
and
2016
are different from the federal statutory tax rate primarily as a result of losses for which no tax benefit has been recognized.
The Company did not record a change in its liability for unrecognized tax benefits or penalties in the
three and nine
months ended
September 30, 2015
. The net interest incurred was immaterial for both the
three and nine
months ended
September 30,
2015
and
2016
, respectively.
The Company increased its reserve for unrecognized tax positions by
$17.6 million
during the three months ended
September 30, 2016
. As unrecognized tax positions are not recognized for financial reporting purposes, this position does not have an impact on the balance sheet, statement of operations or statement of cash flows. If this position were to be sustained, then there would be an increase in the Company's deferred tax assets attributed to its federal and state net operating loss carryforwards, as well as an increase to the amount of the Company's deferred tax asset valuation allowance. The increase was attributable to the write-off of unamortized debt issuance costs resulting from the Company's termination of its Credit Agreement with GE on December 15, 2015. Although the ultimate outcome of this tax position is uncertain, the Company believes that this non-cash charge can be deducted in determining its U.S. taxable income for 2015.
Note
15
—Fair Value Measurements
The Company follows the authoritative guidance for fair value measurements with respect to assets and liabilities that are measured at fair value on a recurring basis and non-recurring basis. Under the standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as of the measurement date. The standard also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The hierarchy consists of the following three levels: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly; Level 3 inputs are unobservable inputs for
the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
At
September 30, 2016
, the Company’s financial instruments consisted of available-for-sale securities, liability-classified warrants, and debt instruments. The Company’s available-for-sale securities are classified within Level 2 because they are valued using the most recent quoted prices for identical assets in markets that are not active and quoted prices for similar assets in active markets. The liability-classified warrants are classified within Level 3 because the Company uses the Black-Scholes option pricing model to estimate the fair value based on inputs that are not observable in any market. The fair value of the Company's debt instruments approximated their carrying values at December 31, 2015 and
September 30, 2016
. See Note
10
for further information about the Company's debt instruments.
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis at
December 31, 2015
and
September 30, 2016
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
December 31, 2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
Available-for-sale securities(1):
|
|
|
|
|
|
|
|
|
Certificate of deposits
|
|
$
|
48,551
|
|
|
$
|
—
|
|
|
$
|
48,551
|
|
|
$
|
—
|
|
Municipal bonds and notes
|
|
16,790
|
|
|
—
|
|
|
16,790
|
|
|
—
|
|
Zero coupon bonds
|
|
499
|
|
|
—
|
|
|
499
|
|
|
—
|
|
Corporate bonds
|
|
37,104
|
|
|
—
|
|
|
37,104
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrants(2)
|
|
632
|
|
|
—
|
|
|
—
|
|
|
632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
September 30, 2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
Available-for-sale securities(1):
|
|
|
|
|
|
|
|
|
Certificate of deposits
|
|
$
|
46,700
|
|
|
$
|
—
|
|
|
$
|
46,700
|
|
|
$
|
—
|
|
Municipal bonds and notes
|
|
14,462
|
|
|
—
|
|
|
14,462
|
|
|
—
|
|
Zero coupon bonds
|
|
429
|
|
|
—
|
|
|
429
|
|
|
—
|
|
Corporate bonds
|
|
15,722
|
|
|
—
|
|
|
15,722
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrants(2)
|
|
579
|
|
|
—
|
|
|
—
|
|
|
579
|
|
(1) Included in short-term investments in the condensed consolidated balance sheets. See Note
5
for further information.
(2) Included in accrued liabilities and other long-term liabilities in the condensed consolidated balance sheets.
Non-Financial Assets
No impairments of long-lived assets measured at fair value on a non-recurring basis have been incurred during the
nine
months ended
September 30, 2015
and
2016
. The Company’s use of these non-financial assets does not differ from their highest and best use as determined from the perspective of a market participant.
Note
16
—Recently Issued Accounting Standards
The Financial Accounting Standards Board ("FASB") has issued three amendments to the new revenue standard, ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
, as follows:
|
|
•
|
In May 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients.
This update clarifies the objectives of collectability, sales and other taxes, non-cash consideration, contract modifications at transition, completed contracts at transition and technical correction.
|
|
|
•
|
In April 2016, the FASB issued ASU No. 2016-10,
Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing.
This update clarifies how an entity identifies performance obligations related to customer contracts and helps to improve the operability and understanding of the licensing implementation guidance.
|
|
|
•
|
In August 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers, Deferral of the Effective Date
, which defers the new revenue guidance to be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period, which for the Company is the first quarter of 2018, using one of two prescribed retrospective methods. The Company is evaluating the impact of this ASU will have on its consolidated financial statements and related disclosures as well as which transition method it will adopt.
|
In October 2016, the FASB issued ASU No. 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.
Under the new pronouncement, the selling (transferring) entity is required to recognize a current tax expense or benefit upon transfer of the asset. Similarly, the purchasing (receiving) entity is required to recognize a deferred tax asset or liability, as well as the related deferred tax benefit or expense, upon purchase or receipt of the asset. This pronouncement is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
In September 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Payments
. The ASU provides clarification as to the classification of certain transactions as operating, investing or financing activities. This pronouncement is effective for reporting periods beginning after December 15, 2017, which for the Company is the first quarter of 2018. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. The ASU amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. This pronouncement is effective for reporting periods beginning after December 15, 2019, which for the Company is the first quarter of 2020. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation – Stock Compensation (Topic 718)
. The pronouncement was issued to simplify the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2016. Early adoption is allowed in an interim or annual reporting period. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02,
Leases
. The new standard will require most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Lessor accounting remains substantially similar to current guidance. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2018, which for the Company is the first quarter of 2019, and mandates a modified retrospective transition method. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
In January 2016, the FASB issued ASU No. 2016-01,
Recognition and Measurement of Financial Assets and Financial Liabilities
. The new standard requires equity investments to be measured at fair value with changes in fair value recognized in net income, simplifies the impairment assessment of equity investments without readily determinable fair values, eliminates the requirement to disclose the methods and significant assumptions used to estimate fair value, requires use of the exit price notion when measuring fair value, requires separate presentation in certain financial statements, and requires an evaluation of the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The new standard is effective for fiscal years beginning after December 15, 2017, which for the Company is the first quarter of 2018. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.
Note
17
—Alternative Fuels Excise Tax Credit
Under separate pieces of U.S. federal appropriations legislation from October 1, 2006 through December 31, 2014, the Company was eligible to receive a federal alternative fuels tax credit (“VETC”) of
$0.50
per gasoline gallon equivalent of CNG and
$0.50
per liquid gallon of LNG that we sold as vehicle fuel. In December 2015, Congress passed the Consolidated Appropriations Act that included the passage of an alternative fuel tax credit which we continue to refer to as VETC. The credit was made retroactive to January 1, 2015 and extended through December 31, 2016, except that the alternative fuel tax credit for LNG sold as a vehicle fuel in 2016 was changed to be based on the diesel gallon equivalent of LNG sold rather than the liquid gallon of LNG sold.
As a result, the Company was eligible to receive a credit of
$0.50
per gasoline gallon equivalent of CNG sold as a vehicle fuel in 2015 and 2016,
$0.50
per liquid gallon of LNG sold in 2015 and
$0.50
per diesel gallon equivalent of LNG sold in 2016.
Based on the service relationship with its customers, either the Company or its customers claim the credit. The Company records its VETC credits as revenue in its condensed consolidated statements of operations, as the credits are fully payable and do not need to offset income tax liabilities to be received.
VETC revenues for 2015, totaling
$30,986
, were all recognized in December 2015. VETC revenues for the
three and nine
months ended
September 30, 2016
were
$6,693
and
$19,609
, respectively.