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 or requires 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 renewable natural gas (“RNG”), compressed natural gas (“CNG”) and liquefied natural gas (“LNG”) (RNG can be delivered in the form of CNG or LNG) for light, medium and heavy-duty vehicles and providing operation and maintenance (“O&M”) services for vehicle fleet customer stations. As a comprehensive solution provider, the Company also designs, builds, operates and maintains fueling stations; sells and services 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 via “virtual” natural gas pipelines and interconnects; procures and sells RNG; sells tradable credits it generates by selling RNG and conventional natural gas as a vehicle fuel, including Renewable Identification Numbers (“RIN Credits” or “RINs”) under the federal Renewable Fuel Standard Phase 2 and credits under the California and the Oregon Low Carbon Fuel Standards (collectively, “LCFS Credits”); helps its customers acquire and finance natural gas vehicles; and obtains federal, state and local credits, grants and incentives. In addition, for all periods presented before March 31, 2017, the Company produced RNG at its own production facilities, and for all periods presented before December 29, 2017, the Company manufactured, sold and serviced natural gas fueling compressors and other equipment used in CNG stations. See Notes
3
and
4
for more information.
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 consolidated financial position as of
June 30, 2018
, and results of operations and comprehensive income (loss) for the
three and six
months ended
June 30, 2017
and
2018
, and cash flows for the
six
months ended
June 30, 2017
and
2018
. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the
three and six
month periods ended
June 30, 2017
and
2018
are not necessarily indicative of the results to be expected for the year ending
December 31, 2018
or for any other interim period or for any future year.
Certain information and disclosures normally included in the notes to consolidated 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 accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements as of and for the year ended
December 31, 2017
that are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2018.
Reclassifications
During the
six
months ended
June 30, 2018
, the Company adopted Accounting Standards Update (“ASU”) No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
(see Note
19
). The new standard requires restricted cash and restricted cash equivalents to be included as components of total cash and cash equivalents as presented on the statement of cash flows. As a result, the Company chose to also conform this classification on the accompanying condensed consolidated balance sheets. This resulted in prior period restricted cash of
$1,127
as of December 31, 2017 being reclassified into one line item with cash and cash equivalents to conform to presentation as of
June 30, 2018
. In addition, certain prior period amounts have been reclassified in the condensed consolidated statements of cash flows to conform to the current period presentation. These reclassifications had no material impact on the Company’s consolidated financial position, results of operations, or cash flows as previously reported.
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 amounts reported in the accompanying condensed consolidated financial statements and these notes. Actual results could differ from those estimates and may result in material effects on the Company’s operating
results and financial position. Significant estimates made in preparing the accompanying condensed consolidated financial statements include (but are not limited to) those related to revenue recognition, goodwill and long-lived asset impairment assessments, income tax valuations and fair value measurements.
Note
2
—Revenue from Contracts with Customers
Revenue Recognition Overview
The Company recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration to which it expects to be entitled in exchange for the goods or services. In order to achieve that core principle, a five-step approach is applied: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue allocated to each performance obligation when the Company satisfies the performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue recognition.
The table below presents the Company’s revenues disaggregated by revenue source. The Company is generally the principal in its customer contracts as it has control over the goods and services prior to them being transferred to the customer, and as such, revenue is recognized on a gross basis. Sales and usage-based taxes are excluded from revenues. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Volume -related
|
$
|
63,290
|
|
|
$
|
62,642
|
|
|
$
|
136,865
|
|
|
$
|
129,978
|
|
Station construction sales
|
12,312
|
|
|
5,781
|
|
|
21,575
|
|
|
11,579
|
|
Alternative fuels excise tax credit (“AFTC”)
|
—
|
|
|
1,382
|
|
|
—
|
|
|
26,863
|
|
Compressor sales
|
5,254
|
|
|
—
|
|
|
11,721
|
|
|
—
|
|
Other
|
160
|
|
|
662
|
|
|
346
|
|
|
4,450
|
|
|
$
|
81,016
|
|
|
$
|
70,467
|
|
|
$
|
170,507
|
|
|
$
|
172,870
|
|
Volume -Related
The Company’s volume -related revenue primarily consists of sales of RNG, CNG and LNG fuel, O&M services and RINs and LCFS Credits.
Fuel and O&M services are sold pursuant to contractual commitments over defined goods -and -service delivery periods. These contracts typically include a stand -ready obligation to supply natural gas and/or provide O&M services daily based on a committed and agreed upon routine maintenance schedule or when and if called upon by the customer.
The Company recognizes fuel and O&M services revenue in the amount to which the Company has the right to invoice. The Company has a right to consideration based on the amount of gasoline gallon equivalents of natural gas dispensed by the customer and current pricing conditions, which are typically billed to the customer on a monthly basis. Since payment terms are less than a year, the Company has elected the practical expedient which allows it to not assess whether a customer contract has a significant financing component.
Contract modifications are not distinct from the existing contract and are typically renewals of fuel and O&M service sales. As a result, these modifications are accounted for as if they were part of the existing contract. The effect of a contract modification on the transaction price is recognized prospectively.
The Company sells RINs and LCFS Credits (the “government credits”) to third parties who need the credits to comply with federal and state requirements. The government credits are considered variable consideration because they can either increase or decrease the transaction price based on volumes of vehicle fuel sold. Additionally, these government credits are constrained until there is an agreement in place to monetize the credits at a determinable price. Upon entering into such an agreement, the government credits are recognized as the constraint is removed.
Station Construction Sales
Station construction contracts are generally short-term, except for certain larger and more complex stations, which can take up to 24 months to complete. For most of the Company’s station construction contracts, the customer contracts with the
Company to provide a significant service of integrating a complex set of tasks and components into a single station. Hence, the entire contract is accounted for as one performance obligation.
The Company generally recognizes revenue over time as the Company performs under its station construction contracts because of the continuous transfer of control of the goods to the customer, who typically controls the work in process. Revenue is recognized based on the extent of progress towards completion of the performance obligation and is recorded proportionally as costs are incurred. Costs to fulfill the Company’s obligations under these contracts typically include labor, materials and subcontractors’ costs, other direct costs and an allocation of indirect costs.
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 the contract, including differing site conditions, the availability of skilled contract labor, the performance of major suppliers and subcontractors, and unexpected changes in material costs. Because a significant change in one or more of these estimates could affect the profitability of these contracts, the contract price and cost estimates are reviewed periodically as work progresses and adjustments proportionate to the cost-to-cost measure of progress are reflected in contract revenues in the reporting period when such estimates are revised as discussed above. Provisions for estimated losses on uncompleted contracts are recorded in the period in which the losses become known.
Contract modifications are typically expansions in scope of an existing station construction project. As a result, these modifications are accounted for as if they were part of the existing contract. The effect of a contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase or a reduction) on a cumulative catch-up basis.
Under the typical payment terms of the Company’s station construction contracts, the customer makes either performance-based payments (“PBPs”) or progress payments. PBPs are interim payments of the contract price based on quantifiable measures of performance or the achievement of specified events or milestones. Progress payments are interim payments of costs incurred as the work progresses. For some of these contracts, the Company may be entitled to receive an advance payment. The advance payment typically is not considered a significant financing component because it is used to meet working capital demands that can be higher in the early stages of a construction contract and to protect the Company if the customer fails to adequately complete some or all of its obligations under the contract. In addition, the customer retains a small portion of the contract price until completion of the contract. Such payment is not considered a significant financing component because the intent is to protect the customer.
In certain contracts with its customers, the Company agrees to provide multiple goods or services, including construction of and sale of a station, O&M services, and sale of fuel to the customer. These contracts have multiple performance obligations because the promise to transfer each separate good or service is separately identifiable and is distinct. This evaluation requires significant judgment and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue recognized in one or more periods.
The Company allocates the contract price to each performance obligation using best estimates of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate the standalone selling price for fuel and O&M services is observable standalone sales, and the primary method used to estimate the standalone selling price for station construction sales is the expected cost plus a margin approach because the Company sells customized customer -specific solutions. Under this approach, the Company forecasts expected costs of satisfying a performance obligation and then adds an appropriate margin for the good or service.
AFTC
See Note
18
for more information about AFTC. AFTC is considered variable consideration because it can either increase or decrease the transaction price based on volumes of vehicle fuel sold. Additionally, AFTC is not recognized as revenue until it is authorized through federal legislation, which also provides a determinable price. The Company recognizes revenue in the period the credit is authorized through federal legislation.
Compressor Sales
The Company completed the CEC Combination (as defined in Note
4
) during the year ended December 31, 2017 and no longer generates revenue from compressor sales.
Other
The majority of other revenue is from sales of used natural gas heavy -duty trucks purchased by the Company. Revenue on these contracts is recognized at the point in time when the customer accepts delivery of the truck.
Remaining Performance Obligations
Remaining performance obligations represents the transaction price of customer orders for which the work has not been performed. As of
June 30, 2018
, the aggregate amount of the transaction price allocated to remaining performance obligations was
$8,069
, which related to the Company’s station construction sale contracts. The Company expects to recognize revenue on the remaining performance obligations under these contracts over the next 12 to 24 months.
For volume -related revenue, the Company has elected to apply an optional exemption, which waives the requirement to disclose the remaining performance obligation for revenue recognized through the “right to invoice” practical expedient.
Costs to Fulfill a Contract
The Company capitalizes costs incurred to fulfill its contracts that (1) relate directly to the contract, (2) are expected to generate resources that will be used to satisfy the Company’s performance obligations under the contract, and (3) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are recorded to depreciation expense as the Company satisfies its performance obligations over the term of the contract. These costs primarily relate to set-up and other direct installation costs incurred by the Company’s subsidiary, NG Advantage, LLC (“NG Advantage”), for equipment that must be installed on customers’ land before NG Advantage is able to deliver CNG to the customer because the customer does not have direct access to the natural gas pipelines. These costs are classified in Land, property, and equipment, net in the accompanying condensed consolidated balance sheets. As of
June 30, 2018
, these capitalized costs incurred to fulfill contracts were $
7,144
with accumulated depreciation of
$4,195
and related amortization of
$495
and $
1,006
for the
three and six
months ended
June 30, 2018
.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) in the accompanying condensed consolidated balance sheets. Changes in the contract asset and liability balances during the
six
months ended
June 30, 2018
, were not materially impacted by any factors outside the normal course of business.
As of
December 31, 2017
and
June 30, 2018
, the Company’s contract balances were as follows:
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|
|
|
|
|
|
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December 31, 2017
|
|
June 30, 2018
|
Receivables, net
|
$
|
63,961
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|
|
$
|
67,824
|
|
|
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Contract Assets - Current
|
$
|
1,603
|
|
|
$
|
579
|
|
Contract Assets - Noncurrent
|
5,046
|
|
|
3,954
|
|
Contract Assets - Total
|
$
|
6,649
|
|
|
$
|
4,533
|
|
|
|
|
|
Contract Liabilities - Current
|
$
|
3,432
|
|
|
$
|
10,044
|
|
Contract Liabilities - Noncurrent
|
13,413
|
|
|
10,388
|
|
Contract Liabilities - Total
|
$
|
16,845
|
|
|
$
|
20,432
|
|
Receivables, Net
Receivables, net, include amounts billed and currently due from customers. The amounts due are stated at their net estimated realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, and the age of outstanding receivables.
Contract Assets
Contract assets include unbilled amounts typically resulting from the Company’s station construction sale contracts, when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and
right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are classified as current or noncurrent based on the timing of billings. The current portion is included in Prepaid expenses and other current assets and the noncurrent portion is included in Notes receivable and other long-term assets, net in the accompanying condensed consolidated balance sheets.
Contract Liabilities
Contract liabilities consist of billings in excess of revenue recognized from the Company’s station construction sale contracts and deferred revenue when cash payments are received or due in advance of the Company’s performance obligation, which are generally for the Company’s volume -related revenue contracts. Billings in excess of revenue recognized of
$1,092
and
$3,267
are classified as current and are included in Deferred revenue in the accompanying condensed consolidated balance sheets as of
December 31, 2017
and
June 30, 2018
, respectively. Deferred revenue is classified as current or noncurrent based on when the revenue is expected to be recognized. The noncurrent portion of deferred revenue is included in Other long -term liabilities in the accompanying condensed consolidated balance sheets.
The increase in the contract liabilities balance for the
six
months ended
June 30, 2018
is primarily driven by billings in excess of revenue recognized, offset by
$1,479
of revenue recognized related to the Company’s contract liability balances as of
December 31, 2017
.
Note
3
—Divestitures
On February 27, 2017, Clean Energy Renewable Fuels (“Renewables”), a subsidiary of the Company, entered into an asset purchase agreement (the “APA”) with BP Products North America, Inc. (“BP”). Pursuant to the APA, Renewables agreed to sell to BP certain assets relating to its RNG production business (the “BP Transaction”), consisting of Renewables’
two
RNG production facilities, Renewables’ interest in joint ventures formed with a third party to develop new RNG production facilities, and Renewables’ third-party RNG supply contracts (the “Assets”). The BP Transaction was completed on March 31, 2017 for a sale price of $
155,511
, plus BP assumed all
$8,820
of obligations under the Canton Bonds (as defined in Note
12
) as of such date.
On March 31, 2017, BP paid Renewables
$30,000
in cash and delivered to Renewables a promissory note with a principal amount of
$123,487
, which was paid in full on April 3, 2017. In addition, as a result of the determination of certain post-closing adjustments, (i) BP paid Renewables an additional
$2,010
on June 22, 2017, and (ii) the gain recorded from the BP Transaction was reduced by
$762
. Pursuant to the APA, the valuation date of the BP Transaction was January 1, 2017, and as a result, the APA included certain adjustments to the purchase price to reflect a determination of the amount of cash accumulated by Renewables from the valuation date to the closing date, net of permitted cash outflows. Control of the Assets was not transferred until the BP Transaction was completed on March 31, 2017. Accordingly, the full operating results of Renewables are included in the accompanying condensed consolidated statements of operations through the March 31, 2017 closing date.
In addition, under the APA, BP is required, following the closing of the BP Transaction, to pay Renewables up to an additional
$25,000
in cash over a
five
-year period if certain performance criteria relating to the Assets are met. The Company satisfied the performance criteria for the first such period, which ended on December 31, 2017, and as a result, the Company recognized a net gain of
$772
as of December 31, 2017, which is included in the total gain on the BP Transaction.
The Company incurred
$3,695
in transaction fees in connection with the BP Transaction, and from March 31, 2017 through
June 30, 2018
, the Company paid
$8,670
in cash and issued
786,146
shares of the Company’s common stock, with a fair value of
$1,998
to former holders of options to purchase membership units in Renewables. The net proceeds from the BP Transaction as of
June 30, 2018
were
$142,996
, net of
$1,007
cash transferred to BP.
Following the completion of the BP Transaction, Renewables and the Company continue to procure RNG from BP under a long-term supply contract and from other RNG suppliers, and resell such RNG through the Company’s natural gas fueling infrastructure as Redeem, the Company’s RNG vehicle fuel. The Company also collects royalties from BP on gas purchased from BP and sold as Redeem at the Company’s fueling stations.
The BP Transaction resulted in a total gain of
$69,886
as of December 31, 2017. Included in the total gain is goodwill of
$26,576
allocated to the disposed assets based on the relative fair values of the assets disposed and the portion of the retained reporting unit.
The Company determined that the BP Transaction did not meet the definition of a discontinued operation because the disposal did not represent a significant disposal nor was the disposal a strategic shift in the Company's strategy.
Note
4
— Investments in Other Entities and Noncontrolling Interest in a Subsidiary
SAFE&CEC S.r.l.
On November 26, 2017, the Company, through its former subsidiary, Clean Energy Compression Corp. (“CEC”), entered into an investment agreement with Landi Renzo S.p.A. (“LR”), an alternative fuels company based in Italy. Pursuant to the investment agreement, the Company and LR agreed to combine their respective natural gas compressor subsidiaries, CEC and SAFE S.p.A, in a new company known as “SAFE&CEC S.r.l.” (such combination transaction is referred to as the “CEC Combination”). SAFE&CEC S.r.l. is focused on manufacturing, selling and servicing natural gas fueling compressors and related equipment for the global natural gas fueling market. Upon the closing of the CEC Combination on December 29, 2017, the Company owns
49%
of SAFE&CEC S.r.l. and LR owns
51%
of SAFE&CEC S.r.l.
The Company accounts for its interest in SAFE&CEC S.r.l. using the equity method of accounting because the Company does not control but has the ability to exercise significant influence over SAFE&CEC S.r.l.’s operations. The Company recorded a loss from this investment of
$706
and $
2,147
for the
three and six
months ended
June 30, 2018
, respectively. The Company has an investment balance in SAFE&CEC S.r.l. of
$27,883
and
$25,756
as of December 31, 2017 and
June 30, 2018
, respectively.
The Company determined that the CEC Combination did not meet the definition of a discontinued operation because the disposal did not represent a strategic shift that will have a major effect on the Company's operations and financial results.
MCEP
On September 16, 2014, the Company formed a joint venture with Mansfield Ventures LLC (“Mansfield Ventures”) 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 Ventures each have a
50%
ownership interest in MCEP. The Company accounts for its interest in MCEP using the equity method of accounting because the Company does not control but has the ability to exercise significant influence over MCEP’s operations. The Company recorded a loss from this investment of
$34
and
$23
for the
three months ended June 30,
2017
and
2018
, respectively, and
$70
and
$50
for the
six
months ended
June 30,
2017
and
2018
, respectively. The Company has an investment balance in MCEP of $
1,512
and
$1,462
as of
December 31, 2017
and
June 30, 2018
, respectively.
NG Advantage
On October 14, 2014, the Company entered into a Common Unit Purchase Agreement (“UPA”) with 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 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.
On July 14, 2017, the Company contributed to NG Advantage all of its right, title and interest in and to a CNG fueling station located in Milton, Vermont. The Company purchased this CNG fueling station from NG Advantage in October 2014 in connection with the UPA, and at that time, the Company entered into a lease agreement with NG Advantage to lease the station back to NG Advantage. This lease agreement was terminated contemporaneously with the contribution of the station to NG Advantage in July 2017. As consideration for the contribution, NG Advantage issued to the Company Series A Preferred Units with an aggregate value of
$7,500
. The Series A Preferred Units provide for an accrued return upon a liquidation event with respect to NG Advantage and will convert into common units of NG Advantage if and when it completes a future equity financing that satisfies certain specified conditions; however, the Series A Preferred Units do not, in themselves, increase the Company's controlling interest in NG Advantage. As a result, immediately following the contribution, the Company's controlling interest in NG Advantage remained at
53.3%
.
On February 28, 2018, the Company entered into a guaranty agreement with NG Advantage and one of its customers for the purchase, sale and transportation of CNG. The Company guarantees NG Advantage’s payment obligations in the event of default up to
$30,000
plus related fees. This guaranty is in effect until thirty days following the Company’s notice to NG Advantage’s customer of its termination. As consideration for the guaranty agreement, NG Advantage issued to the Company
19,660
common units, which increased the Company’s controlling interest in NG Advantage from
53.3%
to
53.5%
.
Net income (loss) included a loss from the noncontrolling interest in NG Advantage of
$731
and
$1,186
for the
three months ended June 30,
2017
and
2018
, respectively, and
$1,066
and
2,935
for the
six
months ended
June 30,
2017
and
2018
, respectively. The value of the noncontrolling interest was
$22,668
and
$19,733
as of
December 31, 2017
and
June 30, 2018
, respectively.
Note
5
—Cash, Cash Equivalents, and Restricted Cash
Cash, cash equivalents and restricted cash as of
December 31, 2017
and
June 30, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
June 30,
2018
|
Cash and cash equivalents
|
$
|
36,081
|
|
|
$
|
41,530
|
|
Restricted cash - standby letters of credit
|
1,127
|
|
|
1,127
|
|
Restricted cash - held in escrow
|
—
|
|
|
750
|
|
Total cash, cash equivalents and restricted cash
|
$
|
37,208
|
|
|
$
|
43,407
|
|
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”) and Canadian Deposit Insurance Corporation (“CDIC”). Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. The amounts in excess of FDIC and other foreign insurance limits were approximately
$34,709
and
$40,110
as of
December 31, 2017
and
June 30, 2018
, respectively.
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 consisted of standby letters of credit renewed annually and an amount held in escrow. As of
December 31, 2017
and
June 30, 2018
, the Company had
no
long-term restricted cash.
Note
6
—Short-term Investments
Short-term investments include available-for-sale debt securities and certificates of deposit. Available-for-sale debt securities are carried at fair value, inclusive of unrealized gains and losses. Unrealized gains and losses for debt securities are recognized in other comprehensive income (loss) net of applicable income taxes. Gains or losses on sales of available-for-sale debt securities are recognized on the specific identification basis.
The Company reviews available-for-sale debt 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
June 30, 2018
, the Company believes its carrying values for its available-for-sale debt securities are properly recorded.
Short-term investments as of
December 31, 2017
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized
Losses
|
|
Estimated Fair
Value
|
Municipal bonds and notes
|
$
|
21,414
|
|
|
$
|
(49
|
)
|
|
$
|
21,365
|
|
Zero coupon bonds
|
54,159
|
|
|
(33
|
)
|
|
54,126
|
|
Corporate bonds
|
55,109
|
|
|
(40
|
)
|
|
55,069
|
|
Certificates of deposit
|
10,902
|
|
|
—
|
|
|
10,902
|
|
Total short-term investments
|
$
|
141,584
|
|
|
$
|
(122
|
)
|
|
$
|
141,462
|
|
Short-term investments as of
June 30, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized
Losses
|
|
Estimated Fair
Value
|
Municipal bonds and notes
|
$
|
33,700
|
|
|
$
|
—
|
|
|
$
|
33,700
|
|
Zero coupon bonds
|
132,925
|
|
|
(28
|
)
|
|
132,897
|
|
Corporate bonds
|
33,647
|
|
|
(10
|
)
|
|
33,637
|
|
Certificates of deposit
|
10,982
|
|
|
—
|
|
|
10,982
|
|
Total short-term investments
|
$
|
211,254
|
|
|
$
|
(38
|
)
|
|
$
|
211,216
|
|
Note
7
—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.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company’s available-for-sale debt securities and certificate of deposits 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 Company’s 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. There were no transfers of assets between Level 1, Level 2, or Level 3 of the fair value hierarchy as of
December 31, 2017
or
June 30, 2018
.
The following tables provide information by level for assets and liabilities that are measured at fair value on a recurring basis as of
December 31, 2017
and
June 30, 2018
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
December 31, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
(1)
:
|
|
|
|
|
|
|
|
|
Municipal bonds and notes
|
|
$
|
21,365
|
|
|
$
|
—
|
|
|
$
|
21,365
|
|
|
$
|
—
|
|
Zero coupon bonds
|
|
54,126
|
|
|
—
|
|
|
54,126
|
|
|
—
|
|
Corporate bonds
|
|
55,069
|
|
|
—
|
|
|
55,069
|
|
|
—
|
|
Certificates of deposit
(1)
|
|
10,902
|
|
|
—
|
|
|
10,902
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrants
(2)
|
|
$
|
536
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Balance at
June 30, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
(1)
:
|
|
|
|
|
|
|
|
|
Municipal bonds and notes
|
|
$
|
33,700
|
|
|
$
|
—
|
|
|
$
|
33,700
|
|
|
$
|
—
|
|
Zero coupon bonds
|
|
132,897
|
|
|
—
|
|
|
132,897
|
|
|
—
|
|
Corporate bonds
|
|
33,637
|
|
|
—
|
|
|
33,637
|
|
|
—
|
|
Certificates of deposit
(1)
|
|
10,982
|
|
|
—
|
|
|
10,982
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrants
(2)
|
|
$
|
444
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
444
|
|
(1) Included in Short-term investments in the accompanying condensed consolidated balance sheets. See Note
6
for more information.
(2) Included in Accrued liabilities and Other long-term liabilities in the accompanying condensed consolidated balance sheets.
Other Financial Assets and Liabilities
The carrying amounts of the Company’s cash, cash equivalents and restricted cash, receivables and payables approximate fair value due to the short-term nature of those instruments. The carrying amounts of the Company’s debt instruments approximated their respective fair values as of
December 31, 2017
and
June 30, 2018
. The fair values of these debt instruments were estimated using a discounted cash flow analysis based on interest rates offered on loans with similar terms to borrowers of similar credit quality, which are Level 3 inputs. See Note
12
for more information about the Company’s debt instruments.
Note
8
—Other Receivables
Other receivables as of
December 31, 2017
and
June 30, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
June 30,
2018
|
Loans to customers to finance vehicle purchases
|
$
|
4,746
|
|
|
$
|
5,327
|
|
Accrued customer billings
|
10,072
|
|
|
7,063
|
|
Fuel tax credits
|
177
|
|
|
1,246
|
|
Other
|
4,240
|
|
|
3,191
|
|
Total other receivables
|
$
|
19,235
|
|
|
$
|
16,827
|
|
Note
9
—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 net realizable value. The Company evaluates inventory balances for excess quantities and obsolescence by analyzing estimated demand, inventory on hand, sales levels and other information and reduces inventory balances to net realizable value for excess and obsolete inventory based on this analysis.
Inventories as of
December 31, 2017
and
June 30, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
June 30,
2018
|
Raw materials and spare parts
|
$
|
35,145
|
|
|
$
|
37,038
|
|
Finished goods
|
93
|
|
|
89
|
|
Total inventories
|
$
|
35,238
|
|
|
$
|
37,127
|
|
Note
10
—Land, Property and Equipment
Land, property and equipment as of
December 31, 2017
and
June 30, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
June 30,
2018
|
Land
|
$
|
2,858
|
|
|
$
|
2,858
|
|
LNG liquefaction plants
|
94,634
|
|
|
94,634
|
|
Station equipment
|
304,090
|
|
|
306,575
|
|
Trailers
|
70,906
|
|
|
71,272
|
|
Other equipment
|
88,313
|
|
|
94,713
|
|
Construction in progress
|
74,905
|
|
|
74,735
|
|
|
635,706
|
|
|
644,787
|
|
Less: accumulated depreciation
|
(268,401
|
)
|
|
(292,170
|
)
|
Total land, property and equipment, net
|
$
|
367,305
|
|
|
$
|
352,617
|
|
Included in land, property and equipment are capitalized software costs of
$26,003
and
$28,262
as of
December 31, 2017
and
June 30, 2018
, respectively. The accumulated amortization of the capitalized software costs is
$18,737
and
$20,410
as of
December 31, 2017
and
June 30, 2018
, respectively.
The Company recorded amortization expense related to the capitalized software costs of
$1,122
and
$955
for the three months ended
June 30, 2017
and
2018
, respectively, and
$1,994
and
$1,673
for the
six
months ended
June 30,
2017
and
2018
, respectively.
As of
June 30, 2017
and
2018
,
$2,396
and
$1,536
, 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 accompanying condensed consolidated statements of cash flows as they are non-cash investing activities.
Note
11
—Accrued Liabilities
Accrued liabilities as of
December 31, 2017
and
June 30, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
June 30,
2018
|
Accrued alternative fuels incentives
(1)
|
$
|
2,954
|
|
|
$
|
6,544
|
|
Accrued employee benefits
|
2,378
|
|
|
3,161
|
|
Accrued interest
|
1,486
|
|
|
3,431
|
|
Accrued gas and equipment purchases
|
8,722
|
|
|
8,144
|
|
Accrued property and other taxes
|
4,582
|
|
|
4,014
|
|
Accrued salaries and wages
|
8,363
|
|
|
4,140
|
|
Other
(2)
|
13,783
|
|
|
14,168
|
|
Total accrued liabilities
|
$
|
42,268
|
|
|
$
|
43,602
|
|
|
|
(1)
|
Includes the amount of RINs and LCFS Credits and, as of
June 30, 2018
, the amount of AFTC payable to third parties. The AFTC had expired as of December 31, 2017, but was reinstated in February 2018 for vehicle fuel sales made from January 1, 2017 through December 31, 2017. See Note
18
for more information about AFTC.
|
|
|
(2)
|
The amount as of December 31, 2017 and
June 30, 2018
includes lease termination fees and asset retirement obligations related to the closure of certain fueling stations and working capital adjustments in the third and fourth quarters of 2017, in addition to funding for certain commitments and transaction fees incurred as a result of the CEC Combination (see Note
4
for more information).
|
Note
12
—Debt
Debt and capital lease obligations as of
December 31, 2017
and
June 30, 2018
consisted of the following and are further discussed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Principal Balances
|
|
Unamortized Debt Financing Costs
|
|
Balance, Net of Financing Costs
|
7.5% Notes
|
$
|
125,000
|
|
|
$
|
131
|
|
|
$
|
124,869
|
|
5.25% Notes
|
110,450
|
|
|
454
|
|
|
109,996
|
|
NG Advantage debt and capital lease obligations
|
23,437
|
|
|
259
|
|
|
23,178
|
|
Capital lease obligations
|
802
|
|
|
—
|
|
|
802
|
|
Other debt
|
1,242
|
|
|
—
|
|
|
1,242
|
|
Total debt and capital lease obligations
|
260,931
|
|
|
844
|
|
|
260,087
|
|
Less amounts due within one year
|
(140,223
|
)
|
|
(524
|
)
|
|
(139,699
|
)
|
Total long-term debt and capital lease obligations
|
$
|
120,708
|
|
|
$
|
320
|
|
|
$
|
120,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
Principal Balances
|
|
Unamortized Debt Financing Costs
|
|
Balance Net of Financing Costs
|
7.5% Notes
|
$
|
100,000
|
|
|
$
|
87
|
|
|
$
|
99,913
|
|
5.25% Notes
|
110,450
|
|
|
150
|
|
|
110,300
|
|
NG Advantage debt and capital lease obligations
|
28,027
|
|
|
303
|
|
|
27,724
|
|
Capital lease obligations
|
780
|
|
|
—
|
|
|
780
|
|
Other debt
|
1,135
|
|
|
—
|
|
|
1,135
|
|
Total debt and capital lease obligations
|
240,392
|
|
|
540
|
|
|
239,852
|
|
Less amounts due within one year
|
(116,000
|
)
|
|
(220
|
)
|
|
(115,780
|
)
|
Total long-term debt and capital lease obligations
|
$
|
124,392
|
|
|
$
|
320
|
|
|
$
|
124,072
|
|
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”), our co-founder and board member T. Boone Pickens and Green Energy Investment Holdings, LLC (“GEIH”), 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 is also a party to 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 original CHK Notes, other than 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 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 original issuance and the Company may repay each
7.5%
Note at maturity in shares of its common stock (provided that the Company may not issue more than
13,993,630
shares of its common stock to holders of
7.5%
Notes) 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 SEC.
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
June 30, 2018
.
On August 27, 2013, GEIH transferred
$5,000
in principal amount of its
7.5%
Notes to certain third parties.
On February 9, 2017, the Company purchased from Mr. Pickens, his
7.5%
Note due July 2018 having an outstanding principal amount of
$25,000
for a cash purchase price of
$21,750
. Upon such purchase, the applicable
7.5%
Notes were surrendered and canceled in full. The Company’s repurchase of this
7.5%
Note resulted in a gain of
$3,191
for the
six
months ended
June 30, 2017
.
On February 21, 2017, GEIH transferred
$11,800
in principal amount of its
7.5%
Notes to certain third parties.
On November 17, 2017, Mr. Pickens transferred all remaining
$40,000
in principal amount of his
7.5%
Notes to a third party.
On June 29, 2018, and pursuant to the consent of the holders of the
7.5%
Notes to the Company’s payments of amounts owed thereunder before maturity, the Company paid to the holders, in cash, an aggregate of
$25,000
in principal amount and
$505
in accrued and unpaid interest owed under all outstanding
7.5%
Notes due July 2018. Upon such payment, the applicable
7.5%
Notes were surrendered and canceled in full.
As a result of the foregoing transactions, as of
June 30, 2018
, (i) GEIH held
7.5%
Notes in an aggregate principal amount of
$56,435
, and (ii) other third parties held
7.5%
Notes in an aggregate principal amount of
$43,565
.
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 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 described in 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
June 30, 2018
.
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 has paid an aggregate of
$84,344
in cash and issued an aggregate of
6,265,829
shares of its common stock to repurchase or exchange an aggregate of
$139,550
in aggregate principal amount of the
5.25%
Notes, together with all accrued and unpaid interest thereon. No such repurchases or exchanges occurred during the
six
months ended
June 30,
2017
or
2018
. All repurchased and exchanged
5.25%
Notes have been surrendered to the trustee for such notes and canceled in full and the Company has no further obligations under such notes.
Plains Credit Facility
On February 29, 2016, the Company entered into a Loan and Security Agreement (the “Plains LSA”) with PlainsCapital Bank (“Plains”). Pursuant to the Plains LSA, 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 were due and payable on February 28, 2017. Simultaneously, the Company drew
$50,000
under this Credit Facility, which the Company and repaid in full on August 31, 2016. On October 31, 2016, the Plains LSA was amended solely to extend the Credit Facility’s maturity date from February 28, 2017 to September 30, 2018. On December 22, 2016, the Company drew
$23,500
under the Credit Facility, which the Company repaid in full on March 31, 2017. As a result, the Company had no amounts outstanding under the Credit Facility as of
June 30, 2018
.
The Credit Facility is evidenced by a promissory note issued by the Company 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 Plains 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 Plains 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 Plains LSA. No events of default under the Plains Loan Documents had occurred as of
June 30, 2018
.
Canton Bonds
On March 19, 2014, Canton Renewables, LLC (“Canton”), a former 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 the issuance were loaned by the Issuer to Canton pursuant to a loan agreement that became effective on March 19, 2014. On March 31, 2017, Canton was sold to BP in the BP Transaction (see Note
3
). As a result, the Canton Bonds became the obligation of BP as of such date.
NG Advantage Debt and Capital Lease Obligations
NG Advantage has debt and capital lease obligations for trailers and equipment due at various dates through
2025
bearing interest at rates up to
8.76%
, with weighted -average interest rates of
4.98%
and
5.88%
as of
December 31, 2017
and
June 30, 2018
, respectively.
NG Advantage pledged to and granted a security interest in all of its right, title and interest in the CNG trailers and equipment purchased with the proceeds received from various creditors.
Other Debt
The Company has other debt due at various dates through
2023
bearing interest at rates up to
5.02%
, with weighted -average interest rates of
4.79%
and
4.79%
as of
December 31, 2017
and
June 30, 2018
, respectively.
Note
13
—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 the 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 during the period and potentially dilutive securities outstanding during the period, and therefore reflects the dilution from common shares that may be issued upon exercise or conversion of these potentially dilutive securities, such as stock options, warrants, convertible notes and restricted stock units. The dilutive effect of stock awards 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.
The information required to compute basic and diluted net income (loss) per share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Weighted-average common shares outstanding
|
150,586,423
|
|
|
162,613,316
|
|
|
149,721,767
|
|
|
157,432,786
|
|
Dilutive effect of potential common shares from restricted stock units and stock options
|
—
|
|
|
—
|
|
|
2,693,382
|
|
|
4,249,459
|
|
Weighted-average common shares outstanding - diluted
|
150,586,423
|
|
|
162,613,316
|
|
|
152,415,149
|
|
|
161,682,245
|
|
The following potentially dilutive securities have been excluded from the diluted net income per share calculations because their effect would have been antidilutive. Although these securities were antidilutive for these periods, they could be dilutive in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
Stock Options
|
10,163,119
|
|
|
10,127,427
|
|
|
10,163,119
|
|
|
8,329,642
|
|
Convertible Notes
|
14,991,521
|
|
|
13,409,242
|
|
|
14,991,521
|
|
|
13,409,242
|
|
Restricted Stock Units
|
2,693,382
|
|
|
2,451,674
|
|
|
—
|
|
|
2,451,674
|
|
Total
|
27,848,022
|
|
|
25,988,343
|
|
|
25,154,640
|
|
|
24,190,558
|
|
At-The-Market Offering Program
On May 31, 2017, the Company terminated its equity distribution agreement (the “Sales Agreement”) with Citigroup Global Markets Inc. (“Citigroup”), as sales agent and/or principal. The Sales Agreement was terminable at will upon written notification by the Company with no penalty. Pursuant to the Sales Agreement, the Company was entitled to issue and sell, from time to time through or to Citigroup, shares of its common stock having an aggregate offering price of up to
$200,000
in an “at-the-market” offering program (the “ATM Program”). The ATM Program commenced on November 11, 2015 when the Company and Citigroup entered into the original equity distribution agreement, which was amended and restated on September 9, 2016 and again on December 21, 2016 prior to its termination.
The following table summarizes the activity under the ATM Program for the periods presented:
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017
|
|
Six Months Ended
June 30, 2017
|
Gross proceeds
|
$
|
—
|
|
|
$
|
10,767
|
|
Fees and issuance costs
|
57
|
|
|
311
|
|
Net proceeds
|
$
|
(57
|
)
|
|
$
|
10,456
|
|
Shares issued
|
—
|
|
|
3,802,500
|
|
Note
14
—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 accompanying condensed consolidated statements of operations during the periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
Stock-based compensation expense, net of $0 tax in 2017 and 2018
|
$
|
2,778
|
|
|
$
|
1,208
|
|
|
$
|
4,688
|
|
|
$
|
3,106
|
|
|
As of
June 30, 2018
, there was
$6,496
of total unrecognized compensation costs related to unvested shares subject to outstanding stock options and restricted stock units, which is expected to be expensed over a weighted-average period of approximately
2.10
years.
Note
15
—Stockholders
’
Equity
Issuance of Common Stock
On May 9, 2018, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with Total Marketing Services, S.A., a wholly owned subsidiary of Total S.A. (“Total”). Pursuant to the Purchase Agreement, the Company agreed to sell and issue, and Total agreed to purchase, up to
50,856,296
shares of the Company’s common stock at a purchase price of
$1.64
per share, all in a private placement (the “Total Private Placement”). The purchase price per share was determined based on the volume-weighted average price for the Company’s common stock between March 23, 2018 (the day on which discussions began between the Company and Total) and May 3, 2018 (the day on which the Company agreed in principle with Total regarding the structure and basic terms of its investment). As of the date of the Purchase Agreement, Total did not hold or otherwise beneficially own any shares of the Company’s common stock, and Total has agreed, until the later of May 9, 2020 or such date when it ceases to hold more than
5.0%
of the Company’s common stock then outstanding, among other similar undertakings and subject to
customary conditions and exceptions, to not purchase shares of the Company’s common stock or otherwise pursue transactions that would result in Total beneficially owning more than
30.0%
of the Company’s equity securities without the approval of the Company’s board of directors.
Pursuant to the Purchase Agreement, the completion of the Total Private Placement was conditioned on the satisfaction or waiver (if and to the extent permitted by applicable laws, rules and regulations) of certain specified conditions, including, among others, that the Company obtain the approval of its stockholders at its 2018 annual stockholders’ meeting of the issuance of all of the shares to be sold under the Purchase Agreement (as and to the extent required by applicable rules of the Nasdaq Stock Market) and the amendment of the Company’s Restated Certificate of Incorporation to increase the number of shares of its common stock it is authorized to issue thereunder. The Company’s stockholders approved both items described above at the Company’s annual stockholders meeting, held on June 8, 2018, and the other conditions set forth in the Purchase Agreement were also satisfied. As a result, on June 13, 2018, the Company and Total closed the Total Private Placement, in which: (1) the Company issued to Total all of the
50,856,296
shares of its common stock issuable under the Purchase Agreement, resulting in Total holding
25.0%
of the outstanding shares of the Company’s common stock and the largest ownership position of the Company as of
June 30, 2018
; (2) Total paid to the Company an aggregate of
$83,404
in gross proceeds, which the Company expects to use for working capital and general corporate purposes, which may include, among other purposes, executing its business plans, pursuing opportunities for further growth, and retiring a portion of its outstanding indebtedness; and (3) the Company and Total entered into a registration rights agreement, described below. In connection with the issuance of common stock, the Company incurred transaction fees of
$2,694
.
Pursuant to the Purchase Agreement, the Company and Total also entered into a registration rights agreement on June 13, 2018, upon the closing under the Purchase Agreement. Pursuant to the registration rights agreement, the Company will be obligated to, at its expense, (1) within
60
days after the closing under the Purchase Agreement, file one or more registration statements with the SEC to cover the resale of the shares issued and sold thereunder, (2) use its commercially reasonable efforts to cause all such registration statements to be declared effective within
90
days after the initial filing thereof with the SEC, (3) use its commercially reasonable efforts to maintain the effectiveness of such registration statements until all such shares are sold or may be sold without restriction under Rule 144 under the Securities Act of 1933, as amended, and (4) with a view to making available to the holders of such shares the benefits of Rule 144, make and keep available adequate current public information, as defined in Rule 144, and timely file with the SEC all required reports and other documents, until all such shares are sold or may be sold without restriction under Rule 144. The Company was in compliance with these covenants as of
June 30, 2018
. If such registration statements are not filed or declared effective as described above or any such effective registration statements subsequently become unavailable for more than
30
days in any 12-month period while they are required to maintained as effective, then the Company would be required to pay liquidated damages to Total equal to
0.75%
of the aggregate purchase price for the shares remaining eligible for such registration rights each month for each such failure (up to a maximum of
4.0%
of the aggregate purchase price for the shares remaining eligible for such registration rights each year).
Note
16
—Income Taxes
The provision for income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded.
The Company’s income tax benefit (expense) was $
(124)
and
$(89)
for the three months ended
June 30, 2017
and
2018
, respectively, and
$2,139
and
$(177)
for the
six
months ended
June 30, 2017
and
2018
, respectively. Tax benefit (expense) for all periods was comprised of taxes due on the Company’s U.S. and foreign operations. The decrease in the Company’s income tax expense for the three months ended
June 30, 2018
as compared to the three months ended
June 30, 2017
was primarily due to a decrease in the foreign tax expense attributable to the CEC Combination (see Note
4
). The increase in the Company’s income tax expense for the
six
months ended
June 30, 2018
as compared to the
six
months ended
June 30, 2017
was primarily due to a decrease in the deferred tax benefit attributed to the reduction of goodwill amortization following the BP Transaction (see Note
3
). The effective tax rates for the
three and six
months ended
June 30, 2017
and
2018
are different from the federal statutory tax rate primarily due to losses for which no tax benefit has been recognized.
Following the BP Transaction, the Company also benefited from the utilization of federal and state net operating loss (“NOL”) carryovers that offset all of the Company's federal and the majority of its state taxes. In addition to the decrease in its deferred tax liability of
$2,493
attributed to the reduction in goodwill following the BP Transaction, the utilization of NOLs also resulted in a decrease of
$29,768
in the Company’s deferred tax assets attributed to NOLs and a corresponding decrease in the Company's deferred tax asset valuation allowance.
The Company increased its liability for unrecognized tax benefits in the
six
months ended
June 30, 2018
by $
2,689
, which was attributable to the portion of AFTC revenue recognized in the period that was offset by the fuel tax the Company
collected from its customers as an unrecognized tax benefit during the year ended December 31, 2017. The net interest incurred was immaterial for both the
three and six
months ended
June 30,
2017
and
2018
, respectively.
Note
17
—Commitments and Contingencies
Environmental Matters
The Company is subject to federal, state, local and foreign environmental laws and regulations. The Company does not anticipate 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.
Litigation, Claims and Contingencies
The Company may become party to various legal actions that arise in the ordinary course of its business. The Company is also subject to audit by tax and other authorities for varying periods in various federal, state, local and foreign jurisdictions, and disputes may arise during the course of these audits. It is impossible to determine the ultimate liabilities that the Company may incur resulting from any of these lawsuits, claims, proceedings, audits, commitments, contingencies and related matters or the timing of these liabilities, if any. If these matters were to ultimately be resolved unfavorably, 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. The Company, does not, however, anticipate such an outcome and it believes the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.
Note
18
—Alternative Fuels Excise Tax Credit
Under separate pieces of U.S. federal legislation, the Company has been eligible to receive the AFTC tax credit for its natural gas vehicle fuel sales made between October 1, 2006 and December 31, 2017. The AFTC, which had previously expired on December 31, 2016, was reinstated on February 9, 2018 to apply to vehicle fuel sales made from January 1, 2017 through December 31, 2017. The AFTC credit is equal to
$0.50
per gasoline gallon equivalent of CNG that the Company sold as vehicle fuel,
$0.50
per liquid gallon of LNG that the Company sold as vehicle fuel through 2015, and
$0.50
per diesel gallon of LNG that the Company sold as vehicle fuel in 2016 and 2017.
Based on the service relationship with its customers, either the Company or its customers claims the credit. The Company records its AFTC credits, if any, as revenue in its consolidated statements of operations because the credits are fully payable to the Company and do not offset income tax liabilities. As such, the credits are not deemed income tax credits under the accounting guidance applicable to income taxes.
As a result of the most recent legislation authorizing AFTC being signed into law on February 9, 2018, all AFTC revenue for vehicle fuel the Company sold in the 2017 calendar year, totaling
$25,481
has been recognized in the three months ended March 31, 2018 and was received during the three months ended June 30, 2018. In addition, during the three months ended June 30, 2018, the Internal Revenue Service approved, and the Company recognized as revenue,
$1,382
of AFTC credit claims related to prior years. AFTC is not currently available, and may not be reinstated, for vehicle fuel sales made after December 31, 2017.
Note
19
—Recently Adopted Accounting Changes and Recently Issued Accounting Standards
Recently Adopted Accounting Changes
In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-02,
Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
, which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the "TCJA"). This update is effective for fiscal years beginning after December 15, 2018, which for the Company is the first quarter of 2019, with early adoption permitted. The Company elected to early adopt this ASU during the
six
months ended
June 30, 2018
, which did not have any impact on the accompanying condensed consolidated financial statements or related disclosures. The Company did not elect to reclassify the stranded tax effects of the TCJA as there were none.
In December 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash.
The new standard requires restricted cash and restricted cash equivalents to be included as components of total cash and cash equivalents as presented on the statement of cash flows. This pronouncement is effective for reporting periods beginning after December 15, 2017, which for the Company is the first quarter of 2018. The Company adopted this standard on a retrospective basis, and adoption did not have a material impact on the Company’s consolidated financial statements or related disclosures. As a result of including restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented in the accompanying condensed consolidated statement of cash flows, net cash flows decreased by
$6,743
for the
six
months ended
June 30, 2017
(see Note
1
).
In September 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Payments
. The new standard 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. Adoption of this standard did not have any impact on the accompanying condensed consolidated financial statements and related disclosures for the
six
months ended
June 30, 2018
.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
(“ASC 606”), which amends the guidance in former Accounting Standards Codification Topic 605,
Revenue Recognition
, to provide a single, comprehensive revenue recognition model for all contracts with customers. The new standard requires an entity to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in amounts that reflect the consideration to which an entity expects to be entitled in exchange for those goods or services. The new standard also requires entities to enhance disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The standard is effective for fiscal years beginning after December 15, 2017, which for the Company is the first quarter of 2018.
The Company adopted this standard using the modified retrospective method and recognized the cumulative effect of initially applying ASC 606 as an adjustment to accumulated deficit in the consolidated balance sheet as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted. This adoption did not have a material impact to the Company’s condensed consolidated financial statements.
The ASC 606 adoption adjustments are as follows, and relate to significant financing components resulting from an advance payment by a customer of NG Advantage and an extended payment term to a station construction customer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
Adjustments Due to ASC 606
|
|
Balance as of January 1, 2018
|
Notes receivable and other long-term assets, net
|
$
|
21,397
|
|
|
$
|
(963
|
)
|
|
$
|
20,434
|
|
Deferred revenue
|
$
|
3,432
|
|
|
$
|
330
|
|
|
$
|
3,762
|
|
Accumulated deficit
|
$
|
(683,570
|
)
|
|
$
|
(1,293
|
)
|
|
$
|
(684,863
|
)
|
The ASC 606 adoption adjustments on the accompanying condensed consolidated balance sheet as of June 30, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2018
|
|
Balance before ASC 606 Adoption
|
|
Effect of Change
|
|
As Reported
|
Notes receivable and other long-term assets, net
|
$
|
17,380
|
|
|
$
|
(926
|
)
|
|
$
|
16,454
|
|
Deferred revenue
|
$
|
9,376
|
|
|
$
|
668
|
|
|
$
|
10,044
|
|
Accumulated deficit
|
$
|
(683,022
|
)
|
|
$
|
(1,594
|
)
|
|
$
|
(684,616
|
)
|
The impact on the accompanying condensed consolidated statements of operations for the
three and six
months ended
June 30, 2018
was immaterial.
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU 2016-02,
Leases
and in January 2018, the FASB issued ASU 2018-01,
Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842
. The new standard requires 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 adoption using a modified retrospective method. The Company is evaluating the impact this ASU will have on its consolidated financial statements and related disclosures.