Clean Energy Fuels Corp. — FY2012 Form 10-K Summary
Business context and reporting period
Clean Energy Fuels Corp. provides CNG, LNG and RNG vehicle-fueling solutions, including station construction and operations, fuel sales, compressor equipment, vehicle conversions, engineering services, renewable natural gas production and customer vehicle financing. The filing covers the fiscal year ended December 31, 2012; the source does not present a separate “2012 Q4” filing, although unaudited fourth-quarter data is included.
- Served approximately 650 fleet customers operating approximately 30,600 natural gas vehicles.
- Owned, operated or supplied 348 fueling stations across 32 states, Canada and Peru.
- Completed 70 America's Natural Gas Highway stations, of which seven were open and selling LNG at year-end.
- Operated in one reportable segment.
Financial performance and key metrics
| Metric | FY2012 | FY2011 | Change |
|---|---|---|---|
| Revenue | $334.0 million | $292.7 million | +14.1% |
| Gross margin | $80.3 million; 24.0% | $76.0 million; 26.0% | Margin down approximately 2.0 points |
| Operating loss | $70.5 million; 21.1% of revenue | $38.6 million; 13.2% | Loss increased $32.0 million |
| Net loss attributable to Clean Energy | $101.3 million; $1.16 per share | $47.6 million; $0.68 per share | Loss increased $53.6 million |
| Gasoline gallon equivalents delivered | 194.9 million | 155.6 million | +25.2% |
| Cash used in operating activities | $19.8 million | $27.1 million | Use improved by $7.4 million |
| Capital expenditures for property and equipment | $192.9 million | $66.7 million | +189.1% |
- Product revenue was $293.8 million and service revenue was $40.2 million.
- CNG and RNG represented 72% of natural gas sales volume, while LNG represented 28%.
- SG&A increased to $118.0 million from $86.9 million, and depreciation and amortization increased to $36.3 million from $30.4 million.
- Interest expense increased to $16.1 million from $9.6 million.
- Fourth-quarter revenue was $99.1 million and fourth-quarter net loss attributable to Clean Energy was $41.7 million, including a $14.5 million impairment of the VPG investment.
Liquidity, debt and balance sheet
- Cash and cash equivalents were $108.5 million at December 31, 2012, compared with $238.1 million a year earlier.
- Short-term investments were $38.2 million, and restricted cash totaled $21.7 million, including $8.4 million classified as current.
- Working capital was $170.8 million, down from $312.4 million.
- Total debt and capital lease obligations were $331.0 million, including $249.0 million of 7.5% convertible notes. Current debt and capital lease obligations were $30.4 million.
- Long-term debt and capital lease obligations, including current maturities, rose from $289.4 million to $331.0 million.
- The company had a $200.0 million GE credit facility for two LNG plants but had drawn none as of year-end. The arrangement includes a company guaranty, required equity contributions and a warrant for up to 5.0 million shares.
- Contractual obligations totaled $589.7 million, including $421.4 million of debt and capital lease obligations, $107.7 million of construction commitments and $17.9 million of LNG take-or-pay commitments.
Material changes versus the prior comparable period
- Fuel volume growth and station construction drove revenue higher, but the effective customer price per gallon declined to $0.81 from $0.86 because of lower natural gas prices and a greater proportion of lower-revenue O&M contracts.
- Gross margin increased in dollars but declined as a percentage of revenue because of competitive pricing, lower-margin government and transit contracts and increased construction activity.
- ANGH investment substantially increased property and equipment, construction in progress and capital spending.
- IMW revenue declined to approximately $64.5 million from $69.1 million; BAF and ServoTech combined revenue increased modestly to approximately $24.3 million from $23.6 million.
- The company recognized $2.9 million of LCFS credit revenue in 2012 after a court injunction affecting the California program was lifted.
- A $14.5 million impairment charge fully reduced the carrying value of the company’s investment in The Vehicle Production Group.
- Stock-based compensation increased to $22.1 million from $13.5 million.
- Cash used in investing activities remained high at $163.9 million, principally reflecting $192.9 million of property and equipment purchases.
Guidance, outlook, commentary, risks and unusual items
- Management planned approximately $186.2 million of 2013 capital expenditures for new stations, ANGH, LNG plants, RNG facilities and LNG trailers.
- The company expected to build approximately 50–70 additional ANGH stations in 2013, subject to truck deployment, LNG demand, site availability and permitting.
- Management expected the CWI 11.9-liter natural gas engine to become commercially available in the second quarter of 2013 and viewed its adoption as important to ANGH economics.
- The company expected the two GE LNG plants to begin production in 2015, subject to site, permitting, financing and construction conditions. The GE facility could terminate if initial loans were not made by December 31, 2014.
- Federal alternative-fuel tax credits were reinstated retroactively for 2012 and extended through 2013. The company estimated $20.8 million attributable to 2012, to be recognized in the first quarter of 2013. This amount was not included in FY2012 revenue.
- Key risks include continued operating losses, dependence on government incentives, substantial capital requirements, debt-service obligations, execution and demand risk for ANGH, delayed or insufficient adoption of natural gas trucks, LNG supply constraints, take-or-pay commitments, commodity-price volatility, intensified competition and regulatory or permitting changes.
- Government entities represented approximately 33% of 2012 revenue, creating exposure to budget constraints, competitive rebidding and contract cancellation.
- The company had $7.9 million of customer vehicle-financing loans outstanding and faces related credit and collateral risks.
- The company reported compliance with its material debt covenants as of December 31, 2012. KPMG issued an unqualified audit opinion and found internal control over financial reporting effective.
Most important facts for an investor to verify
- Whether revenue growth and fuel-volume growth can translate into sustainable positive gross margins without federal tax credits.
- The amount and timing of 2013 capital spending, additional financing needs and progress toward funding the $186.2 million capital plan.
- Actual adoption and operating performance of heavy-duty natural gas trucks and the resulting utilization of ANGH stations.
- Status, cost, financing and completion risk of the GE LNG plants and Boron plant expansion.
- Debt maturities, including $30.4 million due within one year and the $149.0 million SLG notes due in 2016.
- Exposure to LNG take-or-pay contracts, supply availability and natural gas price movements.
- Recognition and cash receipt of the estimated $20.8 million retroactive 2012 fuel tax credit.
- Progress and profitability of the RNG facilities and the value of RIN and LCFS credits.
- Potential dilution from convertible notes, options, Series I warrants and the GE warrant for up to 5.0 million shares.