Clean Energy Fuels Corp. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2011; filed March 12, 2012. The filing is an annual report, although fourth-quarter 2011 results are included. Clean Energy provides CNG, LNG and RNG vehicle-fuel solutions, fueling-station construction and operations, compressor equipment, vehicle conversions and related financing. At year-end, it served approximately 530 fleet customers operating approximately 25,000 vehicles and owned, operated or supplied 273 stations.
Financial and Operating Highlights
| Metric | 2011 | 2010 | Change |
|---|---|---|---|
| Total revenue | $292.7 million | $211.8 million | +$80.9 million, approximately 38% |
| Gross margin | $76.0 million | $69.9 million | +$6.1 million |
| Gross margin percentage | 26.0% | 33.0% | Down approximately 7 percentage points |
| Operating loss | $38.6 million | $5.5 million | Material deterioration |
| Net loss attributable to Clean Energy | $47.6 million | $2.5 million | Loss increased $45.1 million |
| Loss per share | $0.68 | $0.04 | Loss increased |
| Gasoline gallon equivalents delivered | 155.6 million | 122.7 million | Up 26.8% |
| Cash used in operating activities | $11.2 million | $4.0 million | Higher cash use |
| Cash and cash equivalents | $238.1 million | $55.2 million | Up $182.9 million |
| Total debt and capital lease obligations | $289.4 million | $64.4 million | Up $225.0 million |
- CNG volume increased to 101.8 million gasoline gallon equivalents from 81.4 million; LNG volume increased to 47.1 million from 33.9 million; RNG volume decreased to 6.7 million from 7.4 million.
- Product revenue was $260.3 million and service revenue was $32.4 million.
- Cost of sales rose to $216.7 million from $141.9 million. SG&A rose to $86.9 million from $63.3 million, primarily because headcount increased from 710 to 1,036 and the company expanded its operations.
- Depreciation and amortization increased to $30.4 million from $22.5 million.
- Interest expense increased to $9.6 million from $1.2 million following new debt issuance and acquisition-related obligations.
- Cash used in investing activities was $181.8 million, including $85.8 million of property and equipment purchases, $57.1 million transferred to restricted cash and $33.3 million of short-term investments.
- Cash provided by financing activities was $377.8 million, including $200.0 million of convertible notes, $150.0 million from warrant exercises and $40.2 million of DCEMB revenue-bond financing.
Material Changes Versus 2010
- Revenue growth reflected higher fuel volumes, station-construction activity and a full year of contributions from IMW and Northstar. IMW contributed approximately $69.1 million of 2011 revenue and Northstar contributed approximately $10.5 million.
- BAF vehicle-conversion revenue declined to $23.6 million from $42.3 million, principally because AT&T substantially reduced purchases.
- Average revenue per gallon declined to $0.86 from $0.99, and management reported reduced fuel margins in municipal transit and refuse markets because of competition and contract pricing pressure.
- VETC revenue increased to $17.9 million from $16.0 million, but the federal $0.50-per-gallon fuel tax-credit program expired on December 31, 2011. VETC represented approximately 6.1% of 2011 revenue.
- The 2011 loss included a $2.7 million non-cash gain from Series I warrant valuation, compared with a $10.3 million gain in 2010. There were no long-lived-asset impairment charges in 2011; 2010 included approximately $2.2 million of impairment and write-off charges.
- Net cash increased primarily because of substantial equity and debt financing, despite negative operating cash flow and significant capital spending.
Guidance, Outlook and Key Risks
- Management planned approximately $239.5 million of 2012 capital expenditures, primarily for America's Natural Gas Highway, new fueling stations, California LNG-plant expansion, RNG facilities and LNG trailers.
- America's Natural Gas Highway was planned as an approximately 150-station LNG network. Management expected approximately 70 stations in 33 states to be open by the end of 2012, with the remainder scheduled for 2013.
- Management expected natural-gas vehicle adoption to benefit from lower fuel costs, higher gasoline and diesel prices and emissions regulations, but these expectations depend on the commercial availability and adoption of suitable heavy-duty natural-gas engines.
- Major risks include execution and customer adoption of ANGH, availability and cost of LNG, take-or-pay supply commitments, competition and pricing pressure, natural-gas and oil-price volatility, dependence on government incentives and contracts, and the need for additional capital.
- The company had $491.6 million of contractual obligations at year-end, including $392.5 million of debt and capital-lease obligations, $35.2 million of construction commitments and $23.1 million of take-or-pay LNG commitments.
- Debt included $200.0 million of 7.5% convertible notes issued in 2011, an additional planned $50.0 million Chesapeake note in June 2012, and a further planned $50.0 million note in June 2013. The company expected approximately $16.9 million of 2012 interest payments, including interest on the anticipated 2012 Chesapeake note.
- The IRS disputed approximately $5.1 million of historical VETC claims. Clean Energy appealed and could be required to refund some or all of the contested amount.
- California's Low Carbon Fuel Standard was subject to litigation and an injunction that could limit the company's ability to generate revenue from LCFS credits.
- All natural-gas futures contracts qualified for hedge accounting at year-end, and the company reported $3.6 million of margin deposits. A 10% natural-gas price change was estimated to change the value of the futures contracts by approximately $0.2 million.
- KPMG issued an unqualified audit opinion and concluded that internal control over financial reporting was effective as of December 31, 2011.
Most Important Facts to Verify
- Whether ANGH station construction and heavy-duty engine adoption met the stated 2012 and 2013 targets.
- Whether the business can reach sustainable profitability without VETC revenue and while maintaining adequate fuel margins.
- Actual 2012 operating cash flow and capital expenditures relative to the $239.5 million plan.
- Availability and utilization of LNG supply, including exposure to the two take-or-pay contracts.
- Resolution of the IRS’s approximately $5.1 million VETC dispute and the status of LCFS litigation.
- Debt maturities, convertible-note dilution or cash repayment requirements, and compliance with all debt covenants.
- BAF customer concentration and whether replacement sales offset the decline in AT&T purchases.
- Progress and operating performance of the Dallas and Michigan RNG projects, including production reliability and premium pricing.