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 public and private 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.
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, 2019
, and results of operations, comprehensive income (loss) and cash flows for the
three and six
months ended
June 30, 2018
and
2019
. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the
three and six
month periods ended
June 30, 2018
and
2019
are not necessarily indicative of the results to be expected for the year ending
December 31, 2019
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, 2018
that are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2019.
Reclassifications
Certain prior period amounts have been reclassified in the condensed consolidated balance sheets and condensed consolidated statements of operations and 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, fair value measurements, goodwill and long-lived asset valuations and impairment assessments, income tax valuations and stock-based compensation expense.
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. 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 revenue disaggregated by revenue source. The Company is generally the principal in its customer contracts because 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
Volume -related
(1)
|
$
|
62,642
|
|
|
$
|
66,260
|
|
|
$
|
129,978
|
|
|
$
|
140,788
|
|
Station construction sales
|
5,781
|
|
|
5,943
|
|
|
11,579
|
|
|
9,113
|
|
Alternative fuels excise tax credit (“AFTC”)
|
1,382
|
|
|
—
|
|
|
26,863
|
|
|
—
|
|
Other
|
662
|
|
|
115
|
|
|
4,450
|
|
|
115
|
|
Total revenue
|
$
|
70,467
|
|
|
$
|
72,318
|
|
|
$
|
172,870
|
|
|
$
|
150,016
|
|
(1)
Includes changes in fair value of derivative instruments related to the Company’s commodity swap and customer fueling contracts. The amounts are classified as revenue because the Company’s commodity swap contracts are used to economically offset the risk associated with the diesel -to -natural gas price spread resulting from anticipated customer fueling contracts under the Company’s
Zero Now
truck financing program. See Note
6
for more information about these derivative instruments. For the
three and six
months ended
June 30,
2019
, changes in the fair value of commodity swaps and customer fueling contracts amounted to a gain of
$565
and a loss of $
4,395
, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of customer orders for which the work has not been performed. As of
June 30, 2019
, the aggregate amount of the transaction price allocated to remaining performance obligations was
$10,825
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.
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, 2019
, were not materially impacted by any factors outside the normal course of business.
As of
December 31, 2018
and
June 30, 2019
, the Company’s contract balances were as follows:
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
June 30, 2019
|
Receivables, net
|
$
|
68,865
|
|
|
$
|
60,567
|
|
|
|
|
|
Contract Assets - Current
|
$
|
656
|
|
|
$
|
893
|
|
Contract Assets - Noncurrent
|
3,825
|
|
|
3,654
|
|
Contract Assets - Total
|
$
|
4,481
|
|
|
$
|
4,547
|
|
|
|
|
|
Contract Liabilities - Current
|
$
|
5,513
|
|
|
$
|
4,896
|
|
Contract Liabilities - Noncurrent
|
9,844
|
|
|
7,044
|
|
Contract Liabilities - Total
|
$
|
15,357
|
|
|
$
|
11,940
|
|
Receivables, Net
“Receivables, net” in the accompanying condensed consolidated balance sheets 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 payments received primarily from a customer of NG Advantage, LLC (“NG Advantage”) in advance of the performance obligations. Deferred revenue is classified as current or noncurrent based on when the revenue is expected to be recognized. The current portion and noncurrent portion of deferred revenue are included in “Deferred revenue” and “Other long -term liabilities,” respectively, in the accompanying condensed consolidated balance sheets.
Revenue recognized during the
six
months ended
June 30,
2018 related to the Company’s contract liability balances as of December 31, 2017 was
$1,479
. The decrease in the contract liability balances for the
six
months ended
June 30, 2019
is primarily driven by billings in excess of revenue recognized, offset by
$4,412
of revenue recognized related to the Company’s contract liability balances as of
December 31, 2018
.
Note
3
— 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 IMW Industries Ltd. (formerly known as 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. As of 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
$6
for the
three months ended June 30,
2018
and
2019
, respectively, and
$2,147
and
$446
for the
six
months ended
June 30,
2018
and
2019
, respectively. The Company has an investment balance in SAFE&CEC S.r.l. of
$23,372
and
$23,419
as of December 31,
2018
and
June 30, 2019
, 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.
NG Advantage has entered into an arrangement with BP Products North America (“BP”) for the supply, sale and reservation of a specified volume of CNG transportation capacity until March 2022. On February 28, 2018, the Company entered into a guaranty agreement with NG Advantage and BP pursuant to which the Company guarantees NG Advantage’s payment obligations to BP in the event of default by NG Advantage under the supply arrangement, in an amount up to an aggregate of
$30,000
plus related fees. This guaranty is in effect until
thirty days
following the Company’s notice to BP of its termination. As initial 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%
.
On October 1, 2018, the Company purchased
1,000,001
common units from NG Advantage for an aggregate cash purchase price of
$5,000
. This purchase increased Clean Energy’s controlling interest in NG Advantage from
53.5%
to
61.7%
.
In each month from November 2018 through February 2019, the Company was issued
100,000
additional common units of NG Advantage, for a total of
400,000
common units, pursuant to the guaranty agreement entered in February 2018. The issuance of
400,000
additional common units increased the Company’s controlling interest in NG Advantage to
64.6%
as of
June 30, 2019
.
On February 15, 2019, NG Advantage and the Company entered into a transaction pursuant to which the Company agreed to lend to NG Advantage up to
$5,000
in accordance with the terms of a delayed draw convertible promissory note (the “2019 Note”). NG Advantage simultaneously drew
$2,500
under the 2019 Note, and on April 15, 2019, NG Advantage drew the remaining
$2,500
under the 2019 Note. As discussed below, on June 28, 2019, all unpaid principal and accrued interest under the 2019 Note was subsumed within the 2019 Convertible Note (as defined below).
On May 17, 2019, the Company agreed to lend to NG Advantage up to
$500
in accordance with the terms of the promissory note (the “2019 Bridge Loan”). On June 11, 2019, NG Advantage drew
$144
under the 2019 Bridge Loan. As discussed below, on June 28, 2019, all unpaid principal and accrued interest under the 2019 Bridge Loan was subsumed within the 2019 Convertible Note.
On June 28, 2019, the Company agreed to lend to NG Advantage up to
$15,188
in accordance with the terms of the convertible promissory note (the “2019 Convertible Note”). NG Advantage simultaneously drew
$3,500
under the 2019 Convertible Note. The outstanding principal and accrued interest under the 2019 Note and 2019 Bridge Loan were incorporated into the 2019 Convertible Note, which resulted in the cancellation of the 2019 Note and 2019 Bridge Loan. All unpaid principal and accrued interest is due on the earlier of December 31, 2019 or in the event of default. In connection with the 2019 Convertible Note, NG Advantage issued to the Company a warrant to purchase
86,879
common units. As of
June 30, 2019
, NG Advantage had an outstanding balance of
$8,688
under the 2019 Convertible Note. This intercompany transaction has been eliminated in consolidation.
The Company recorded a loss attributable to the noncontrolling interest in NG Advantage of
$1,186
and
$1,711
for the
three months ended June 30,
2018
and
2019
, respectively and
$2,935
and
$3,590
for the
six
months ended
June 30,
2018
and
2019
, respectively. The value of the noncontrolling interest was
$17,011
and
$13,193
as of
December 31, 2018
and
June 30, 2019
, respectively.
Note
4
—Cash, Cash Equivalents, and Restricted Cash
Cash, cash equivalents and restricted cash as of
December 31, 2018
and
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
June 30,
2019
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
29,844
|
|
|
$
|
40,886
|
|
Restricted cash - standby letter of credit
|
30
|
|
|
30
|
|
Restricted cash - held in escrow
|
750
|
|
|
750
|
|
Total cash, cash equivalents and current portion of restricted cash
|
$
|
30,624
|
|
|
$
|
41,666
|
|
|
|
|
|
Long-term assets:
|
|
|
|
Restricted cash - standby letter of credit
|
$
|
4,000
|
|
|
$
|
4,000
|
|
Restricted cash - held in escrow
|
—
|
|
|
848
|
|
Total long-term portion of restricted cash
|
$
|
4,000
|
|
|
$
|
4,848
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash
|
$
|
34,624
|
|
|
$
|
46,514
|
|
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”) limits. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. The amounts in excess of FDIC and CDIC limits were approximately
$28,524
and
$39,556
as of
December 31, 2018
and
June 30, 2019
, 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.
Note
5
—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, 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, 2019
, the Company believes its carrying values for its available-for-sale debt securities are properly recorded.
Short-term investments as of
December 31, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized
Losses
|
|
Estimated Fair
Value
|
Municipal bonds and notes
|
$
|
9,210
|
|
|
$
|
(19
|
)
|
|
$
|
9,191
|
|
Zero coupon bonds
|
29,823
|
|
|
(28
|
)
|
|
29,795
|
|
Corporate bonds
|
26,175
|
|
|
(22
|
)
|
|
26,153
|
|
Certificates of deposit
|
507
|
|
|
—
|
|
|
507
|
|
Total short-term investments
|
$
|
65,715
|
|
|
$
|
(69
|
)
|
|
$
|
65,646
|
|
Short-term investments as of
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gross Unrealized
Gains (Losses)
|
|
Estimated Fair
Value
|
Municipal bonds and notes
|
$
|
15,265
|
|
|
$
|
2
|
|
|
$
|
15,267
|
|
Zero coupon bonds
|
35,514
|
|
|
(2
|
)
|
|
35,512
|
|
Corporate bonds
|
15,288
|
|
|
—
|
|
|
15,288
|
|
Certificates of deposit
|
517
|
|
|
—
|
|
|
517
|
|
Total short-term investments
|
$
|
66,584
|
|
|
$
|
—
|
|
|
$
|
66,584
|
|
Note
6
- Derivative Instruments and Hedging Activities
In October 2018, the Company executed
two
commodity swap contracts with Total Gas & Power North America, an affiliate of TOTAL and THUSA (as defined in Notes
15
and
12
, respectively), for a total of
five million
diesel gallons annually from April 1, 2019 to June 30, 2024. These commodity swap contracts are used to manage diesel price fluctuation risks related to the natural gas fuel supply commitments the Company makes in its fueling agreements with fleet operators that participate in the
Zero Now
truck financing program. These contracts are not designated as accounting hedges and as a result, changes in the fair value of derivative instruments are recognized as earnings in “Product revenue” in the accompanying condensed consolidated statements of operations.
During the six months ended June 30, 2019, the Company entered into fueling agreements with fleet operators under the
Zero Now
truck financing program. The fueling agreements contain a pricing feature indexed to diesel, which the Company evaluated to be embedded derivatives and recorded at fair value at the time of execution with the changes in fair value of the embedded derivatives recognized as earnings in “Product revenue” in the accompanying condensed consolidated statements of operations.
Derivatives as of
December 31, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Net Amount Presented
|
Assets:
|
|
|
|
|
|
|
|
|
Commodity swaps:
|
|
|
|
|
|
Current portion of derivative assets, related party
|
$
|
1,508
|
|
|
$
|
—
|
|
|
$
|
1,508
|
|
Long-term portion of derivative assets, related party
|
8,824
|
|
|
—
|
|
|
8,824
|
|
Total derivative assets
|
$
|
10,332
|
|
|
$
|
—
|
|
|
$
|
10,332
|
|
Derivatives and embedded derivatives as of
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts Recognized
|
|
Gross Amounts Offset
|
|
Net Amount Presented
|
Assets:
|
|
|
|
|
|
|
|
|
Commodity swaps:
|
|
|
|
|
|
Current portion of derivative assets, related party
|
$
|
655
|
|
|
$
|
—
|
|
|
$
|
655
|
|
Long-term portion of derivative assets, related party
|
5,041
|
|
|
—
|
|
|
5,041
|
|
Fueling agreements:
|
|
|
|
|
|
Prepaid expenses and other current assets
|
134
|
|
|
—
|
|
|
134
|
|
Notes receivable and other long-term assets, net
|
316
|
|
|
—
|
|
|
316
|
|
Total derivative assets
|
$
|
6,146
|
|
|
$
|
—
|
|
|
$
|
6,146
|
|
As of
December 31, 2018
and
June 30, 2019
, the Company had a total volume on open commodity swap contracts of
25.0 million
and
24.4 million
diesel gallons at a weighted -average price of approximately
$3.18
and
$2.82
per gallon, respectively.
The following table reflects the weighted -average price of open commodity swap contracts as of
December 31, 2018
and
June 30, 2019
, by year with associated volumes, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
June 30, 2019
|
Year
|
|
Volumes (Diesel Gallons)
|
|
Weighted -Average Price per Diesel Gallon
|
|
Volumes (Diesel Gallons)
|
|
Weighted -Average Price per Diesel Gallon
|
2019
|
|
3,125,000
|
|
|
$
|
3.18
|
|
|
2,500,000
|
|
|
$
|
2.92
|
|
2020
|
|
5,000,000
|
|
|
$
|
3.18
|
|
|
5,000,000
|
|
|
$
|
2.82
|
|
2021
|
|
5,000,000
|
|
|
$
|
3.18
|
|
|
5,000,000
|
|
|
$
|
2.82
|
|
2022
|
|
5,000,000
|
|
|
$
|
3.18
|
|
|
5,000,000
|
|
|
$
|
2.82
|
|
2023
|
|
5,000,000
|
|
|
$
|
3.18
|
|
|
5,000,000
|
|
|
$
|
2.82
|
|
2024
|
|
1,875,000
|
|
|
$
|
3.18
|
|
|
1,875,000
|
|
|
$
|
2.62
|
|
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 used the income approach to value its outstanding commodity swap contracts and embedded derivatives in its fueling agreements under the
Zero Now
truck financing program (see Note
6
). Under the income approach, the Company used a discounted cash flow (“DCF”) model in which cash flows anticipated over the term of the contracts are discounted to their present value using an expected discount rate. The discount rate used for cash flows reflects the specific risks in spot and forward rates and credit valuation adjustments. This valuation approach is considered a Level 3 fair value measurement. The significant unobservable inputs used in the fair value measurement of the Company’s derivative instruments are Ultra-Low Sulfur Diesel (“ULSD”) forward prices and differentials from ULSD to Petroleum Administration for Defense District (“PADD”) regions. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the ULSD forward prices is accompanied by a directionally opposite but less extreme change in the ULSD-PADD differential.
The Company estimated the fair value of its outstanding commodity swap contracts based on the following inputs as of
December 31, 2018
and
June 30, 2019
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
June 30, 2019
|
Significant Unobservable Inputs
|
|
Input Range
|
|
Weighted Average
|
|
Input Range
|
|
Weighted Average
|
ULSD Gulf Coast Forward Curve
|
|
$1.71 - $1.79
|
|
$1.75
|
|
$1.80 - $1.86
|
|
$1.83
|
Historical Differential to PADD 3 Diesel
|
|
$0.76 - $1.16
|
|
$0.89
|
|
$0.76 - $1.16
|
|
$0.90
|
Historical Differential to PADD 5 Diesel
|
|
$1.22 - $2.12
|
|
$1.55
|
|
$1.25 - $2.30
|
|
$1.65
|
The Company estimated the fair value of embedded derivatives in its fueling agreements under the
Zero Now
truck financing program based on the following inputs as of
June 30, 2019
:
|
|
|
|
|
|
|
|
June 30, 2019
|
Significant Unobservable Inputs
|
|
Input Range
|
|
Weighted Average
|
ULSD Gulf Coast Forward Curve
|
|
$1.80 - $1.86
|
|
$1.83
|
Historical Differential to PADD 5 Diesel
|
|
$1.25 - $2.30
|
|
$1.65
|
Historical Differential to PADD 1B Diesel
|
|
$1.00 - $1.60
|
|
$1.26
|
The Company’s liability-classified warrants, which were all issued by NG Advantage, 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 or liabilities between Level 1, Level 2, or Level 3 of the fair value hierarchy as of
December 31, 2018
or
June 30, 2019
.
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, 2018
and
June 30, 2019
, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
Available-for-sale securities
(1)
:
|
|
|
|
|
|
|
|
|
Municipal bonds and notes
|
|
$
|
9,191
|
|
|
$
|
—
|
|
|
$
|
9,191
|
|
|
$
|
—
|
|
Zero coupon bonds
|
|
29,795
|
|
|
—
|
|
|
29,795
|
|
|
—
|
|
Corporate bonds
|
|
26,153
|
|
|
—
|
|
|
26,153
|
|
|
—
|
|
Certificates of deposit
(1)
|
|
507
|
|
|
—
|
|
|
507
|
|
|
—
|
|
Commodity swap contracts
(2)
|
|
10,332
|
|
|
—
|
|
|
—
|
|
|
10,332
|
|
Embedded derivatives
(3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrants
(4)
|
|
$
|
1,079
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
Available-for-sale debt securities
(1)
:
|
|
|
|
|
|
|
|
|
Municipal bonds and notes
|
|
$
|
15,267
|
|
|
$
|
—
|
|
|
$
|
15,267
|
|
|
$
|
—
|
|
Zero coupon bonds
|
|
35,512
|
|
|
—
|
|
|
35,512
|
|
|
—
|
|
Corporate bonds
|
|
15,288
|
|
|
—
|
|
|
15,288
|
|
|
—
|
|
Certificates of deposit
(1)
|
|
517
|
|
|
—
|
|
|
517
|
|
|
—
|
|
Commodity swap contracts
(2)
|
|
5,696
|
|
|
—
|
|
|
—
|
|
|
5,696
|
|
Embedded derivatives
(3)
|
|
450
|
|
|
—
|
|
|
—
|
|
|
450
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Warrants
(4)
|
|
$
|
2,676
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,676
|
|
(1)
Included in “Short-term investments” in the accompanying condensed consolidated balance sheets. See Note
5
for more information.
(2)
Included in “Derivative assets, related party” and “Long-term portion of derivative assets, related party” in the accompanying condensed consolidated balance sheets. See Note
6
for more information.
(3)
Included in “Prepaid expenses and other current assets” and “Notes receivable and other long-term assets, net” in the accompanying condensed consolidated balance sheets. See Note
6
for more information.
(4)
Included in “Other long-term liabilities” in the accompanying condensed consolidated balance sheets.
The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis as shown in the tables above that used significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: Commodity Swap Contracts
|
|
Assets: Embedded Derivatives
|
|
Liabilities: Warrants
|
|
Balance as of December 31, 2017
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(536
|
)
|
|
Gain (loss) included in earnings
|
—
|
|
|
—
|
|
|
92
|
|
|
Balance as of June 30, 2018
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(444
|
)
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
$
|
10,332
|
|
|
$
|
—
|
|
|
$
|
(1,079
|
)
|
|
Settlements, net
|
209
|
|
|
—
|
|
|
—
|
|
|
Gain (loss) included in earnings
|
(4,845
|
)
|
|
450
|
|
|
(1,597
|
)
|
|
Balance as of June 30, 2019
|
$
|
5,696
|
|
|
$
|
450
|
|
|
$
|
(2,676
|
)
|
|
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, 2018
and
June 30, 2019
. 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, 2018
and
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
June 30,
2019
|
Loans to customers to finance vehicle purchases
|
$
|
276
|
|
|
$
|
1,821
|
|
Accrued customer billings
|
6,261
|
|
|
5,897
|
|
Fuel tax credits
|
434
|
|
|
434
|
|
Other
|
8,573
|
|
|
1,256
|
|
Total other receivables
|
$
|
15,544
|
|
|
$
|
9,408
|
|
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.
Inventory as of
December 31, 2018
and
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
June 30,
2019
|
Raw materials and spare parts
|
$
|
34,890
|
|
|
$
|
33,781
|
|
Finished goods
|
85
|
|
|
89
|
|
Total inventory
|
$
|
34,975
|
|
|
$
|
33,870
|
|
Note
10
—Land, Property and Equipment
Land, property and equipment as of
December 31, 2018
and
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
June 30,
2019
|
Land
|
$
|
3,681
|
|
|
$
|
3,681
|
|
LNG liquefaction plants
|
94,633
|
|
|
94,633
|
|
Station equipment
|
319,119
|
|
|
315,547
|
|
Trailers
|
75,901
|
|
|
75,242
|
|
Other equipment
|
97,268
|
|
|
98,424
|
|
Construction in progress
|
73,485
|
|
|
75,995
|
|
|
664,087
|
|
|
663,522
|
|
Less: accumulated depreciation
|
(313,519
|
)
|
|
(334,892
|
)
|
Total land, property and equipment, net
|
$
|
350,568
|
|
|
$
|
328,630
|
|
Included in “Land, property and equipment, net” are capitalized software costs of
$29,344
and
$29,987
as of
December 31, 2018
and
June 30, 2019
, respectively. Accumulated amortization of the capitalized software costs is
$22,472
and
$24,568
as of
December 31, 2018
and
June 30, 2019
, respectively.
The Company recorded amortization expense related to the capitalized software costs of
$955
and
$1,064
for the three months ended
June 30, 2018
and
2019
, respectively, and
$1,673
and
$2,099
for the
six
months ended
June 30,
2018
and
2019
, respectively.
As of
June 30, 2018
and
2019
,
$1,536
and
$817
, respectively, are included in “Accounts payable” and “Accrued liabilities,” 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, 2018
and
June 30, 2019
consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
June 30,
2019
|
Accrued alternative fuels incentives
|
$
|
6,923
|
|
|
$
|
6,212
|
|
Accrued employee benefits
|
2,248
|
|
|
3,009
|
|
Accrued interest
|
78
|
|
|
1,142
|
|
Accrued gas and equipment purchases
|
12,833
|
|
|
7,774
|
|
Accrued property and other taxes
|
3,397
|
|
|
4,605
|
|
Accrued salaries and wages
|
8,609
|
|
|
5,681
|
|
Other
|
14,381
|
|
|
11,340
|
|
Total accrued liabilities
|
$
|
48,469
|
|
|
$
|
39,763
|
|
Note
12
—Debt
Debt obligations as of
December 31, 2018
and
June 30, 2019
consisted of the following and are further discussed below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Principal Balances
|
|
Unamortized Debt Financing Costs
|
|
Balance, Net of Financing Costs
|
7.5% Notes
|
$
|
50,000
|
|
|
$
|
58
|
|
|
$
|
49,942
|
|
NG Advantage debt
|
28,904
|
|
|
155
|
|
|
28,749
|
|
Other debt
|
1,024
|
|
|
—
|
|
|
1,024
|
|
Total debt
|
79,928
|
|
|
213
|
|
|
79,715
|
|
Less amounts due within one year
|
(4,811
|
)
|
|
(99
|
)
|
|
(4,712
|
)
|
Total long-term debt
|
$
|
75,117
|
|
|
$
|
114
|
|
|
$
|
75,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
Principal Balances
|
|
Unamortized Debt Financing Costs
|
|
Balance Net of Financing Costs
|
7.5% Notes
|
$
|
50,000
|
|
|
$
|
38
|
|
|
$
|
49,962
|
|
NG Advantage debt
|
29,726
|
|
|
126
|
|
|
29,600
|
|
Other debt
|
912
|
|
|
—
|
|
|
912
|
|
Total debt
|
80,638
|
|
|
164
|
|
|
80,474
|
|
Less amounts due within one year
|
(55,620
|
)
|
|
(58
|
)
|
|
(55,562
|
)
|
Total long-term debt
|
$
|
25,018
|
|
|
$
|
106
|
|
|
$
|
24,912
|
|
7.5%
Notes
In June 2013, the Company issued notes (the “
7.5%
Notes”) to T. Boone Pickens and Green Energy Investment Holdings, LLC (“GEIH”) in the amount of
$150,000
. The
7.5%
Notes 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
7.5%
Notes include 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, 2019
.
Prior to January 1, 2018, (i) the Company purchased
$25,000
of the
7.5%
Notes from Mr. Pickens, (ii) Mr. Pickens transferred all remaining balance of his
7.5%
Notes to third parties, and (iii) GEIH transferred
$16,800
in principal amount of its
7.5%
Notes to third parties.
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 purchased
7.5%
Notes were canceled in full.
On December 4, 2018, the Company purchased from the holders thereof all outstanding
7.5%
Notes due July 2019, having an aggregate outstanding principal amount of
$50,000
, for a cash purchase price of
$50,500
. Upon such purchase, the purchased
7.5%
Notes were canceled in full.
As a result of the foregoing transactions, as of
June 30, 2019
, (i) GEIH held
7.5%
Notes in an aggregate principal amount of
$32,906
, and (ii) other third parties held
7.5%
Notes in an aggregate principal amount of
$17,094
, all of which are due June 2020.
Plains Credit Facility
On February 29, 2016, the Company entered into a Loan and Security Agreement (the “Plains LSA”) with PlainsCapital Bank (“Plains”), which, as amended on December 6, 2017, has a maturity date of September 30, 2019. Pursuant to the Plains LSA, Plains agreed to lend the Company up to
$50,000
on a revolving basis from time to time (the “Credit Facility”). The Company had
no
amounts outstanding under the Credit Facility as of
June 30, 2019
.
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 that the Company holds in an account at Plains. There are certain covenants and events of default associated with the Plains LSA. No events of default under the Plains LSA had occurred as of
June 30, 2019
.
Société Générale Term Loan Facility
On January 2, 2019, the Company entered into a term credit agreement (the “Credit Agreement”) with Société Générale, a company incorporated as a société anonyme under the laws of France (“SG”). The Credit Agreement provides for a term loan facility (the “SG Facility”) pursuant to which the Company may obtain, subject to certain conditions, up to
$100,000
of loans (“Loans”) in support of its
Zero Now
truck financing program. Under the Credit Agreement, the Company is permitted to use the proceeds from the Loans solely to fund the incremental cost of trucks purchased or financed under the
Zero Now
truck financing program and related fees and expenses incurred by the Company in connection therewith. Interest on outstanding Loans accrues at a rate equal to LIBOR plus
1.30%
per annum, and a commitment fee on any unused portion of the SG Facility accrues at a rate equal to
0.39%
per annum. Interest and commitment fees are payable quarterly.
The Credit Agreement does not include financial covenants, and the Company has not provided SG with any security for its obligations under the Credit Agreement. As described below, THUSA has entered into the Guaranty to guarantee the Company’s payment obligations to SG under the Credit Agreement. The Company has not drawn down on the SG Facility and no events of defaults had occurred as of
June 30, 2019
.
TOTAL Credit Support Agreement
On January 2, 2019, the Company entered a credit support agreement (“CSA”) with Total Holdings USA Inc. (“THUSA”), a wholly owned subsidiary of TOTAL (as defined in Note
15
). Under the CSA, THUSA agreed to enter into a guaranty agreement (“Guaranty”) pursuant to which it has guaranteed the Company’s obligation to repay to SG up to
$100,000
in Loans and interest thereon in accordance with the Credit Agreement. In consideration for the commitments of THUSA under the CSA, the Company is required to pay THUSA a quarterly guaranty fee at a rate per quarter equal to
2.5%
of the average aggregate Loan amount for the preceding calendar quarter.
As security for the Company’s obligations under the CSA, on January 2, 2019, the Company entered into a pledge and security agreement with THUSA and delivered a collateral assignment of contracts to THUSA, pursuant to which the Company collaterally assigned to THUSA all fueling agreements it enters into with participants in the
Zero Now
truck financing program. In addition, on January 2, 2019, the Company entered into a lockbox agreement with THUSA and Plains, under which the Company granted THUSA a security interest in the cash flow generated by the fueling agreements the Company enters into with participants in the
Zero Now
truck financing program.
The CSA will terminate following the later of: the payment in full of all of the Company’s obligations under the CSA; and the termination or expiration of the Guaranty following the maturity date of the last outstanding Loan or December 31, 2023, whichever is earlier.
NG Advantage Debt
On May 12, 2016 and January 24, 2017, respectively, NG Advantage entered into a Loan and Security Agreement (the “Commerce LSA”) with Commerce Bank & Trust Company (“Commerce”), pursuant to which Commerce agreed to lend NG Advantage
$6,300
and
$6,150
, respectively. The proceeds were primarily used to fund the purchases of CNG trailers and equipment. Interest and principal for both loans are payable monthly in
84
equal monthly installments at an annual rate of
4.41%
and
5.0%
, respectively. As collateral security for the prompt payment in full when due of NG Advantage’s obligations to Commerce under the Commerce LSA, NG Advantage pledged to and granted Commerce a security interest in all of its right, title and interest in the CNG trailers and equipment purchased with the proceeds received under the Commerce LSA.
On November 30, 2016, NG Advantage entered into a Loan and Security Agreement (the “Wintrust LSA”) with Wintrust Commercial Finance (“Wintrust”), pursuant to which Wintrust agreed to lend NG Advantage
$4,695
. The proceeds were primarily used to fund the purchases of CNG trailers and equipment. Interest and principal is payable monthly in
72
equal monthly installments at an annual rate of
5.17%
. As collateral security for the prompt payment in full when due of NG Advantage’s obligations to Wintrust under the Wintrust LSA, NG Advantage pledged to and granted Wintrust a security interest in all of its right, title and interest in the CNG trailers and equipment purchased with the proceeds received under the Wintrust LSA.
Financing Obligations
NG Advantage has entered into sale and leaseback transactions with various lessors as described below. In each instance, the sale and leaseback transaction does not qualify for sale-leaseback accounting because of NG Advantage’s continuing involvement with the buyer-lessor due to a fixed price repurchase option. As a result, the transactions are recorded under the financing method, in which the assets remain on the accompanying condensed consolidated balance sheets and the proceeds from the transactions are recorded as financing liabilities.
On December 18, 2017, NG Advantage entered into a sale-leaseback arrangement through a Master Lease Agreement (the “BoA MLA”) with Bank of America Leasing & Capital, LLC (“BoA”). Pursuant to the BoA MLA, NG Advantage received
$2,117
in cash for CNG trailers and simultaneously leased them back from BoA for
five years
commencing January 1, 2018 with interest and principal payable in
60
equal monthly installments.
On March 1, 2018, NG Advantage entered into a sale-leaseback arrangement through a Master Lease Agreement (the “First National MLA”) with First National Capital, LLC (“First National”). Pursuant to the First National MLA, NG Advantage received
$6,261
in cash, net of fees and the first month’s lease payment for CNG trailers and simultaneously leased them back from First National for
six years
commencing March 1, 2018 with interest and principal payable in
72
equal monthly installments.
On December 20, 2018 (the “Closing Date”), NG Advantage entered into a purchase agreement to sell a compression station for a purchase price of
$7,000
to an entity whose member owners are noncontrolling interest member owners of NG Advantage. On the Closing Date and immediately following the consummation of the sale of the compression station, NG Advantage entered into a lease agreement with the buyer of the station (the “Lease”) pursuant to which the station was leased back to NG Advantage for a term of
five years
with monthly rent payments equal to
$70
. Of the purchase price, NG Advantage received
$4,730
in cash, net of fees, the first month’s lease payment, and the repayment of a
$2,000
promissory note from one of the member owners of the buyer, which was issued on November 19, 2018.
On January 17, 2019, NG Advantage entered into a sale-leaseback arrangement through a Master Lease Agreement (the “Nations MLA”) with Nations Fund I, LLC (“Nations”). Pursuant to the Nations MLA, NG Advantage received
$3,358
in cash, net of the first month’s lease payment, for CNG trailers and simultaneously leased them back from Nations for
four years
commencing February 1, 2019 with interest and principal payable in
48
equal monthly installments.
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
4.78%
and
4.78%
as of
December 31, 2018
and
June 30, 2019
, 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,
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
Weighted-average common shares outstanding
|
162,613,316
|
|
|
204,653,723
|
|
|
157,432,786
|
|
|
204,426,459
|
|
Dilutive effect of potential common shares from restricted stock units and stock options
|
—
|
|
|
—
|
|
|
4,249,459
|
|
|
—
|
|
Weighted-average common shares outstanding -diluted
|
162,613,316
|
|
|
204,653,723
|
|
|
161,682,245
|
|
|
204,426,459
|
|
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 these securities were antidilutive for these periods, they could be dilutive in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
Stock options
|
10,127,427
|
|
|
10,192,762
|
|
|
8,329,642
|
|
|
10,192,762
|
|
Convertible notes
|
13,409,242
|
|
|
3,164,557
|
|
|
13,409,242
|
|
|
3,164,557
|
|
Restricted stock units
|
2,451,674
|
|
|
1,289,751
|
|
|
2,451,674
|
|
|
1,289,751
|
|
Total
|
25,988,343
|
|
|
14,647,070
|
|
|
24,190,558
|
|
|
14,647,070
|
|
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,
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
Stock-based compensation expense, net of $0 tax in 2018 and 2019
|
$
|
1,208
|
|
|
$
|
918
|
|
|
$
|
3,106
|
|
|
$
|
2,164
|
|
As of
June 30, 2019
, there was
$4,643
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
1.74 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, in a private placement (the “Total Private Placement”). The purchase price per share was 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.
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 approximately
25.0%
of the outstanding shares of the Company’s common stock and the largest ownership position of the Company as of
June 30,
2019
; (2) Total paid to the Company an aggregate of
$83,404
in gross proceeds, which the Company has used and expects to continue to use for working capital and general corporate purposes, which may include 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
$1,909
.
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 filed a registration statement with the SEC to cover the resale of the shares issued and sold under the Purchase Agreement, which was declared effective on August 16, 2018, and is obligated to use its commercially reasonable efforts to maintain the effectiveness of such registration statement until all such shares are sold or may be sold without restriction under Rule 144 under the Securities Act of 1933, as amended. As of
June 30, 2019
, the Company was in compliance with all of its registration covenants set forth in the registration rights agreement.
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 expense was $
89
and
$66
for the three months ended
June 30, 2018
and
2019
, respectively and
$177
and
$126
for the
six
months ended
June 30,
2018
and
2019
, respectively. Tax 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 and six
months ended
June 30, 2019
as compared to the
three and six
months ended
June 30, 2018
was primarily due to a reduction in the Company’s expected state tax expense. The effective tax rates for the
three and six
months ended
June 30, 2018
and
2019
are different from the federal statutory tax rate primarily due to losses for which no tax benefit has been recognized.
The Company increased its liability for unrecognized tax benefits in the
six
months ended
June 30, 2018
by $
2,689
. This increase is the portion of AFTC revenue recognized in the period attributed to the federal fuel tax the Company collected from its customers during the year ended December 31, 2017. The net interest incurred was immaterial for both the
three and six
months ended
June 30,
2018
and
2019
, 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
—Leases
Leases (Topic 842)
On January 1, 2019, the Company adopted the new lease accounting standard (see Note
20
for more information on the standard and the impact of the adoption) where leases are now classified as either operating leases or finance leases. The Company’s operating leases are comprised of real estate for fueling stations, office spaces, warehouses, a LNG liquefaction plant, and office equipment, and its finance leases are comprised of vehicles.
At the inception of a contract the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether it obtains the right to substantially
all the economic benefit from the use of the asset throughout the period, and (3) whether it has the right to direct the use of the asset. The commencement date of the contract is when the lessor makes the underlying asset available for use by the lessee.
Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent obligations to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the net present value of fixed lease payments over the lease term. ROU assets also include any initial direct costs and advance lease payments made, and exclude lease incentives. Lease liabilities also include terminal purchase options when deemed reasonably certain to exercise. The Company’s lease term includes options to extend when it is reasonably certain that it will exercise that option. The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a term of 12 months or less.
As most of the Company’s operating leases do not have an implicit rate that can be readily determined, the Company uses its secured incremental borrowing rate for the same term as the underlying lease based on information available at lease commencement. For finance leases, the Company uses the rate implicit in the lease.
The lease classification affects the expense recognition on the condensed consolidated statement of operations. Operating lease charges are recorded in “Cost of sales, exclusive of depreciation and amortization,” and “Selling, general and administrative” expense. Finance lease charges are split, where depreciation on assets under finance leases is recorded in “Depreciation and amortization” expense and an implied interest component is recorded in “Interest expense.” The expense recognition for operating leases and finance leases is substantially consistent with legacy accounting.
The Company leases an office space from T. Boone Pickens in Dallas, TX. The lease, which expires in October 2019, calls for monthly rental payments of
$12
.
NG Advantage has provided residual value guarantees on leases of certain vehicles aggregating
$1,381
to the lessors. NG Advantage expects to owe these amounts in full and therefore they have been included in the measurement of the lease liabilities and ROU assets.
Certain of the Company’s real estate leases contain variable lease payments, including payments based on a change in the index or gasoline gallon equivalents of natural gas dispensed at fueling stations. These variable lease payments cannot be determined at the commencement of the lease, are not included in the ROU assets and liabilities and are recorded as a period expense when incurred.
Lessee Accounting
As of
June 30, 2019
, the Company’s finance and operating lease asset and liability balances were as follows:
|
|
|
|
|
|
June 30, 2019
|
Finance leases:
|
|
Land, property and equipment, gross
|
$
|
5,917
|
|
Accumulated depreciation
|
(1,927
|
)
|
Land, property and equipment, net
|
$
|
3,990
|
|
|
|
Current portion of finance lease obligations
|
$
|
654
|
|
Long-term portion of finance lease obligations
|
3,236
|
|
Total finance lease liabilities
|
$
|
3,890
|
|
|
|
Operating leases:
|
|
Operating lease right-of-use assets
(1)
|
$
|
24,490
|
|
|
|
Current portion of operating lease obligations
|
$
|
3,570
|
|
Long-term portion of operating lease obligations
|
22,245
|
|
Total operating lease liabilities
|
$
|
25,815
|
|
(1) The Company’s operating lease ROU assets are comprised of the following:
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
Assets
|
|
Liabilities
|
Real estate for fueling stations
|
$
|
18,432
|
|
|
$
|
18,432
|
|
LNG plant, office spaces and warehouses
|
6,048
|
|
|
7,373
|
|
Office equipment
|
10
|
|
|
10
|
|
Total operating lease right-of-use assets
|
$
|
24,490
|
|
|
$
|
25,815
|
|
The components of lease expense for finance and operating leases consisted of the following:
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
Finance leases:
|
|
|
|
Depreciation on assets under finance leases
|
$
|
105
|
|
|
$
|
364
|
|
Interest on lease liabilities
|
50
|
|
|
99
|
|
Total finance leases expense
|
$
|
155
|
|
|
$
|
463
|
|
|
|
|
|
Operating leases:
|
|
|
|
Lease expense
|
$
|
1,618
|
|
|
$
|
3,101
|
|
Lease expense on short-term leases
|
485
|
|
|
1,587
|
|
Variable lease expense
|
699
|
|
|
1,330
|
|
Sublease income
|
(52
|
)
|
|
(103
|
)
|
Total operating leases expense
|
$
|
2,750
|
|
|
$
|
5,915
|
|
Supplemental information on finance and operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
Operating cash outflows from finance leases
|
$
|
(49
|
)
|
|
$
|
(98
|
)
|
Operating cash outflows from operating leases
|
$
|
(710
|
)
|
|
$
|
(1,860
|
)
|
Financing cash outflows from finance leases
|
$
|
(665
|
)
|
|
$
|
(849
|
)
|
|
|
|
|
|
Assets obtained in exchange for new finance lease liabilities
(1)
|
$
|
134
|
|
|
$
|
263
|
|
ROU assets obtained in exchange for new operating lease liabilities
(1)
|
$
|
1,732
|
|
|
$
|
1,732
|
|
|
|
|
|
|
June 30, 2019
|
Weighted-average remaining lease term - finance leases
|
4.91 years
|
Weighted-average remaining lease term - operating leases
|
11.24 years
|
|
|
Weighted-average discount rate - finance leases
|
4.72%
|
Weighted-average discount rate - operating leases
|
8.20%
|
(1) These amounts are excluded from the accompanying condensed consolidated statements of cash flows as they are non-cash investing activities.
The following schedule represents the Company’s maturities of finance and operating lease liabilities as of
June 30, 2019
:
|
|
|
|
|
|
|
|
|
|
Finance Leases
|
|
Operating Leases
|
Fiscal year:
|
|
|
|
2019
|
$
|
437
|
|
|
$
|
2,808
|
|
2020
|
752
|
|
|
4,627
|
|
2021
|
662
|
|
|
3,720
|
|
2022
|
555
|
|
|
2,809
|
|
2023
|
479
|
|
|
2,807
|
|
Thereafter
|
1,610
|
|
|
24,242
|
|
Total minimum lease payments
|
4,495
|
|
|
41,013
|
|
Less amount representing interest
|
(605
|
)
|
|
(15,198
|
)
|
Present value of lease liabilities
|
$
|
3,890
|
|
|
$
|
25,815
|
|
Lessor Accounting
The Company leases fueling station equipment to customers that contain an option to extend and an end-of-term purchase option. Receivables from these leases are accounted for as finance leases, specifically sales-type leases, and are included in “Other receivables” and “Notes receivable and other long-term assets, net” in the condensed consolidated balance sheets.
The Company recognizes the net investment in the lease as the sum of the lease receivable and the unguaranteed residual value, both of which are measured at the present value using the interest rate implicit in the lease.
During the
three and six
months ended
June 30, 2019
, the Company recognized
$37
and
$73
, respectively, in “Interest income” on its lease receivables.
The following schedule represents the Company’s maturities of lease receivables as of
June 30, 2019
:
|
|
|
|
|
Fiscal year:
|
|
2019
|
$
|
93
|
|
2020
|
186
|
|
2021
|
186
|
|
2022
|
186
|
|
2023
|
186
|
|
Thereafter
|
1,240
|
|
Total minimum lease payments
|
2,077
|
|
Less amount representing interest
|
(1,007
|
)
|
Present value of lease receivables
|
$
|
1,070
|
|
Leases (Topic 840)
As required by the new lease accounting standard, legacy disclosures are provided for periods prior to adoption.
Operating Lease Commitments
The Company leases facilities, including the land for its LNG production plant in Boron, California and certain equipment under noncancelable operating leases expiring at various dates through 2038. If a lease has a fixed and determinable escalation clause, or periods of rent holidays, the difference between rental expense and rent paid is included in “Accrued liabilities” and “Other long-term liabilities” in the accompanying consolidated balance sheets.
The following schedule represents the Company’s future minimum lease obligations under all noncancelable operating leases as of
December 31, 2018
:
|
|
|
|
|
Fiscal year:
|
|
|
2019
|
$
|
6,340
|
|
2020
|
4,332
|
|
2021
|
3,311
|
|
2022
|
2,409
|
|
2023
|
2,300
|
|
Thereafter
|
13,214
|
|
Total future minimum lease payments
|
$
|
31,906
|
|
Rent expense totaled
$1,698
and
$3,225
for the
three and six
months ended
June 30,
2018
, respectively.
Capital Lease Obligations and Receivables
The Company leases equipment under capital leases with a weighted-average interest rate of
4.48%
. As of
December 31, 2018
, future payments under these capital leases are as follows:
|
|
|
|
|
Fiscal year:
|
|
2019
|
$
|
883
|
|
2020
|
742
|
|
2021
|
656
|
|
2022
|
540
|
|
2023
|
529
|
|
Thereafter
|
1,868
|
|
Total minimum lease payments
|
5,218
|
|
Less amount representing interest
|
(749
|
)
|
Capital lease obligations
|
4,469
|
|
Less current portion
|
(693
|
)
|
Capital lease obligations, less current portion
|
$
|
3,776
|
|
The value of the equipment under capital leases as of
December 31, 2018
was
$6,143
, with related accumulated amortization of
$1,832
, respectively.
The Company also leases fueling station equipment to customers under sales-type leases with a weighted-average interest rate of
13.5%
.
As of
December 31, 2018
, future receipts under this lease are as follows:
|
|
|
|
|
Fiscal year:
|
|
2019
|
$
|
186
|
|
2020
|
186
|
|
2021
|
186
|
|
2022
|
186
|
|
2023
|
186
|
|
Thereafter
|
1,240
|
|
Capital lease receivables
|
2,170
|
|
Less amount representing interest
|
(1,080
|
)
|
Capital lease receivables, less current portion
|
$
|
1,090
|
|
Note
19
—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 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 during the three months ended March 31, 2018 and was collected subsequent to that date. 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
20
—Recently Adopted Accounting Changes
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
(“ASC 842”), which amends the guidance in former Accounting Standards Codification Topic 840,
Leases
(“ASC 840”). The new standard requires most leases to be recognized on the balance sheet which will increase reported assets and liabilities. Accounting for lessors and capital leases (now known as finance leases) is substantially similar to ASC 840. 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.
The Company adopted this standard using the modified retrospective method and recognized the cumulative effect of initially applying ASC 842 as an adjustment to accumulated deficit in the consolidated balance sheet as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts are not adjusted. This adoption had a material impact to the Company’s condensed consolidated balance sheets and did not have a material impact to the Company’s condensed consolidated statements of operations or its condensed consolidated statements of cash flows. The primary impact was to record ROU assets and lease liabilities for existing operating leases on the condensed consolidated balance sheets.
As permitted under ASC 842, the Company elected the package of practical expedients that permit it to not reassess (1) whether an existing contract is or contains a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The Company also elected the practical expedient allowing it to use hindsight in determining the lease term and in assessing the likelihood a purchase option will be exercised.
The ASC 842 adoption adjustments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018
|
|
Adjustments Due to ASC 842
|
|
Balance as of January 1, 2019
|
Operating lease right-of-use assets
|
$
|
—
|
|
|
$
|
24,453
|
|
|
$
|
24,453
|
|
Operating lease obligations
|
$
|
—
|
|
|
$
|
25,943
|
|
|
$
|
25,943
|
|
Accrued liabilities
|
$
|
48,469
|
|
|
$
|
(496
|
)
|
|
$
|
47,973
|
|
Other long-term liabilities
|
$
|
15,035
|
|
|
$
|
(994
|
)
|
|
$
|
14,041
|
|
The ASC 842 adoption adjustments on the accompanying condensed consolidated balance sheet as of
June 30, 2019
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
Balance before ASC 842 Adoption
|
|
Effect of Change
|
|
As Reported
|
Operating lease right-of-use assets
|
$
|
—
|
|
|
$
|
24,490
|
|
|
$
|
24,490
|
|
Current portion of operating lease obligations
|
$
|
—
|
|
|
$
|
3,570
|
|
|
$
|
3,570
|
|
Long-term portion of operating lease obligations
|
$
|
—
|
|
|
$
|
22,245
|
|
|
$
|
22,245
|
|
Accrued liabilities
|
$
|
40,294
|
|
|
$
|
(531
|
)
|
|
$
|
39,763
|
|
Other long-term liabilities
|
$
|
13,611
|
|
|
$
|
(710
|
)
|
|
$
|
12,901
|
|