Plug Power Inc. — 2012 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2012. The filing was signed April 1, 2013. Plug Power develops hydrogen fuel-cell systems, primarily GenDrive products for material-handling vehicles; GenDrive was its principal business focus.
Financial and operating performance
| Metric | 2012 | 2011 |
|---|---|---|
| Total revenue | $26.1 million | $27.6 million |
| Product and service revenue | $24.4 million | $23.2 million |
| Research and development contract revenue | $1.7 million | $3.9 million |
| Net loss | $31.9 million | $27.5 million |
| Operating loss | $36.7 million | $31.1 million |
| Net cash used in operating activities | $20.2 million | $33.3 million |
| Cash and cash equivalents at year-end | $9.4 million | $13.9 million |
| Working capital at year-end | $6.9 million | $22.5 million |
| Total liabilities / stockholders’ equity at year-end | $24.4 million / $15.0 million | $26.6 million / $29.0 million |
- Product and service revenue increased 5.1%, reflecting higher shipments, while total revenue fell 5.5%, primarily because research-contract revenue declined.
- Product and service costs were $37.7 million against $24.4 million of related revenue, a gross loss of approximately $13.3 million. Higher costs included a $2.9 million net warranty-reserve adjustment for component-quality issues.
- Net loss widened by $4.4 million. A $4.8 million noncash gain from revaluing warrant liabilities partially offset the operating loss; the warrant liability fell to $0.5 million from $5.3 million.
- Cash used in investing activities was approximately $14,000; financing activities provided $15.7 million, primarily from stock offerings. Year-end line-of-credit borrowings were $3.4 million and were repaid in January 2013. The facility expired March 29, 2013 and was not renewed.
- GenDrive shipments totaled 1,391 units in 2012 versus 1,024 in 2011; 255 units were placed under a power-purchase agreement and revenue is recognized through monthly payments. The filing separately reports 1,136 units shipped in the product-and-service revenue category. Orders fell to 731 from 2,503, and year-end backlog declined to 1,309 units, valued at about $25.9 million, from 1,969 units and $36.0 million.
Material developments and outlook
- Management expected 2013 operating cash burn of approximately $10–$15 million and estimated available liquidity would fund operations only into May 2013. KPMG’s report cited substantial doubt about the company’s ability to continue as a going concern. Management stated additional funding was necessary; no further funding was committed at filing.
- After year-end, Plug Power completed a February 2013 public offering and over-allotment, receiving approximately $2.5 million in net proceeds. The offering included shares and warrants and was highly dilutive. It also completed a sale-leaseback of its Latham property on March 27, 2013; the filing describes a 15-year lease and $750,000 of cash-collateralized standby letters of credit. The amended transaction’s final cash proceeds are not clearly stated in the filing text provided.
- A December 2012 restructuring eliminated 22 full-time positions. Management expected annual expense reductions of $3–$4 million; the company recorded $286,000 of restructuring charges.
- Plug Power reported component-quality issues affecting next-generation GenDrive units and a $2.9 million net warranty-reserve adjustment. The year-end product warranty reserve was $2.7 million, including about $2.0 million associated with identified component issues.
- Additional risks include order cancellations or delays, concentrated customers and receivables, dependence on sole- or limited-source suppliers, hydrogen availability and cost, competition, and the need to improve product reliability and manufacturing economics. Ballard temporarily stopped shipping stacks during a fourth-quarter 2012 dispute; the company said the dispute was resolved.
- NASDAQ had notified the company that its share price did not meet the $1 minimum bid requirement, with an April 10, 2013 deadline to regain compliance. The filing also disclosed pending Soroof litigation and a Chardan financing-fee claim; outcomes and potential exposure were uncertain.
Important facts for investors to verify
- Current liquidity, cash burn, and whether subsequent financing or asset-sale proceeds are sufficient to sustain operations beyond the disclosed May 2013 estimate.
- Whether orders and backlog convert to shipments, installation, and revenue, and whether order levels recover from the 2012 decline.
- Progress in reducing GenDrive unit and service costs, improving reliability, and resolving warranty claims.
- NASDAQ listing status and the effect of post-year-end share and warrant issuance on dilution and financing capacity.
- Final terms and cash impact of the Latham sale-leaseback, including rent obligations and restricted cash, as well as developments in the disclosed legal matters.