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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
Commission File Number: 001-33480
CLEAN ENERGY FUELS CORP.
(Exact name of registrant as specified in its charter)
Delaware
33-0968580
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

4675 MacArthur Court, Suite 800, Newport Beach, CA 92660
(Address of principal executive offices, including zip code)
(949) 437-1000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, $0.0001 par value per share
 
CLNE
 
Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer x
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
 
 
 
 
 
Emerging growth company o
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of November 5, 2019, there were 204,723,055 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.
 


Table of Contents

CLEAN ENERGY FUELS CORP. AND SUBSIDIARIES
INDEX
Table of Contents
 
 
 
 
Unless the context indicates otherwise, all references to “Clean Energy,” the “Company,” “we,” “us,” or “our” in this report refer to Clean Energy Fuels Corp. together with its consolidated subsidiaries.

This report contains forward-looking statements. See the cautionary note regarding these statements in Part I, Item 2.-Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report.

We own registered or unregistered trademark or service mark rights to Redeem™, NGV Easy Bay™, Clean Energy™, Clean Energy Renewables™, and Clean Energy Cryogenics™. Although we do not use the “®” or “™” symbol in each instance in which one of our trademarks appears in this report, this should not be construed as any indication that we will not assert our rights thereto to the fullest extent under applicable law. Any other service marks, trademarks and trade names appearing in this report are the property of their respective owners.



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Table of Contents

PART I.—FINANCIAL INFORMATION
Item 1.—Financial Statements (Unaudited)
Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data; Unaudited)
 
December 31,
2018
 
September 30,
2019
Assets
 
 
 
Current assets:
 
 
 
Cash, cash equivalents and current portion of restricted cash
$
30,624

 
$
32,855

Short-term investments
65,646

 
66,755

Accounts receivable, net of allowance for doubtful accounts of $1,919 and $2,247 as of December 31, 2018 and September 30, 2019, respectively
68,865

 
65,349

Other receivables
15,544

 
9,110

Derivative assets, related party
1,508

 
931

Inventory
34,975

 
31,040

Prepaid expenses and other current assets
8,444

 
9,538

Total current assets
225,606

 
215,578

Operating lease right-of-use assets

 
24,043

Land, property and equipment, net
350,568

 
322,870

Long-term portion of restricted cash
4,000

 
4,848

Notes receivable and other long-term assets, net
17,470

 
21,106

Long-term portion of derivative assets, related party
8,824

 
5,742

Investments in other entities
26,079

 
25,870

Goodwill
64,328

 
64,328

Intangible assets, net
2,207

 
1,461

Total assets
$
699,082

 
$
685,846

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Current portion of debt
$
4,712

 
$
55,397

Current portion of finance lease obligations
693

 
642

Current portion of operating lease obligations

 
3,176

Accounts payable
19,024

 
13,972

Accrued liabilities
48,469

 
41,399

Deferred revenue
7,361

 
6,855

Total current liabilities
80,259

 
121,441

Long-term portion of debt
75,003

 
24,044

Long-term portion of finance lease obligations
3,776

 
3,140

Long-term portion of operating lease obligations

 
21,901

Other long-term liabilities
15,035

 
12,853

Total liabilities
174,073

 
183,379

Commitments and contingencies (Note 17)


 


Stockholders’ equity:
 
 
 
Preferred stock, $0.0001 par value. Authorized 1,000,000 shares; no shares issued and outstanding

 

Common stock, $0.0001 par value. Authorized 304,000,000 shares; issued and outstanding 203,599,892 shares and 204,719,995 shares as of December 31, 2018 and September 30, 2019, respectively
20

 
20

Additional paid-in capital
1,198,769

 
1,202,339

Accumulated deficit
(688,653
)
 
(709,316
)
Accumulated other comprehensive loss
(2,138
)
 
(2,058
)
Total Clean Energy Fuels Corp. stockholders’ equity
507,998

 
490,985

Noncontrolling interest in subsidiary
17,011

 
11,482

Total stockholders’ equity
525,009

 
502,467

Total liabilities and stockholders’ equity
$
699,082

 
$
685,846

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data; Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
Revenue:
 
 
 
 
 
 
 
Product revenue
$
67,441

 
$
62,808

 
$
220,812

 
$
190,947

Service revenue
9,879

 
11,626

 
29,378

 
33,503

Total revenue
77,320

 
74,434

 
250,190

 
224,450

Operating expenses:
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown separately below):
 
 
 
 
 
 
 
Product cost of sales
48,063

 
43,145

 
139,658

 
137,696

Service cost of sales
4,743

 
6,787

 
13,595

 
18,674

Change in fair value of derivative warrants
(9
)
 
(10
)
 
(101
)
 
1,587

Selling, general and administrative
18,405

 
17,640

 
57,202

 
54,007

Depreciation and amortization
13,363

 
12,247

 
39,496

 
37,331

Total operating expenses
84,565

 
79,809

 
249,850

 
249,295

Operating income (loss)
(7,245
)
 
(5,375
)
 
340

 
(24,845
)
Interest expense
(4,096
)
 
(1,704
)
 
(13,126
)
 
(5,437
)
Interest income
1,129

 
560

 
2,193

 
1,707

Other income (expense), net
(193
)
 
165

 
(126
)
 
2,928

(Loss) income from equity method investments
(542
)
 
377

 
(2,739
)
 
(123
)
Loss from formation of equity method investment
(1,163
)
 

 
(1,163
)
 

Loss before income taxes
(12,110
)
 
(5,977
)
 
(14,621
)
 
(25,770
)
Income tax expense
(89
)
 
(68
)
 
(266
)
 
(194
)
Net loss
(12,199
)
 
(6,045
)
 
(14,887
)
 
(25,964
)
Loss attributable to noncontrolling interest
1,300

 
1,711

 
4,235

 
5,301

Net loss attributable to Clean Energy Fuels Corp.
$
(10,899
)
 
$
(4,334
)
 
$
(10,652
)
 
$
(20,663
)
Loss per share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.05
)
 
$
(0.02
)
 
$
(0.06
)
 
$
(0.10
)
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
203,469,222

 
204,712,888

 
172,946,896

 
204,522,984

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands; Unaudited)
 
Clean Energy Fuels Corp.
 
Noncontrolling Interest
 
Total
 
Three Months Ended
September 30,
 
Three Months Ended
September 30,
 
Three Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
Net loss
$
(10,899
)
 
$
(4,334
)
 
$
(1,300
)
 
$
(1,711
)
 
$
(12,199
)
 
$
(6,045
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of $0 tax in 2018 and 2019
59

 
(623
)
 

 

 
59

 
(623
)
Unrealized gains on available-for-sale securities, net of $0 tax in 2018 and 2019
56

 
5

 

 

 
56

 
5

Total other comprehensive income (loss)
115

 
(618
)
 

 

 
115

 
(618
)
Comprehensive loss
$
(10,784
)
 
$
(4,952
)
 
$
(1,300
)
 
$
(1,711
)
 
$
(12,084
)
 
$
(6,663
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Clean Energy Fuels Corp.
 
Noncontrolling Interest
 
Total
 
Nine Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
Net loss
$
(10,652
)
 
$
(20,663
)
 
$
(4,235
)
 
$
(5,301
)
 
$
(14,887
)
 
$
(25,964
)
 
 
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of $0 tax in 2018 and 2019
(45
)
 
7

 

 

 
(45
)
 
7

Unrealized gains on available-for-sale securities, net of $0 tax in 2018 and 2019
659

 
73

 

 

 
659

 
73

Total other comprehensive income
614

 
80

 

 

 
614

 
80

Comprehensive loss
$
(10,038
)
 
$
(20,583
)
 
$
(4,235
)
 
$
(5,301
)
 
$
(14,273
)
 
$
(25,884
)
See accompanying notes to condensed consolidated financial statements.

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Table of Contents

Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands; except share data)
 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest in
Subsidiary
 
Total
Stockholders

Equity
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
 
 
Balance, December 31, 2017
151,650,969

 
$
15

 
$
1,111,432

 
$
(683,570
)
 
$
(887
)
 
$
22,668

 
$
449,658

Cumulative effect of adopting ASU 2014-09

 

 

 
(1,293
)
 

 

 
(1,293
)
Balance, January 1, 2018
151,650,969

 
15

 
1,111,432

 
(684,863
)
 
(887
)
 
22,668

 
448,365

Issuance of common stock, net of offering costs
863,581

 

 
110

 

 

 

 
110

Stock-based compensation

 

 
1,898

 

 

 

 
1,898

Net income (loss)

 

 

 
12,222

 

 
(1,749
)
 
10,473

Other comprehensive loss

 

 

 

 
(25
)
 

 
(25
)
Balance, March 31, 2018
152,514,550

 
15

 
1,113,440

 
(672,641
)
 
(912
)
 
20,919

 
460,821

Issuance of common stock, net of offering costs
50,916,228

 
5

 
80,753

 

 

 

 
80,758

Stock-based compensation

 

 
1,208

 

 

 

 
1,208

Net loss

 

 

 
(11,975
)
 

 
(1,186
)
 
(13,161
)
Other comprehensive income

 

 

 

 
524

 

 
524

Balance, June30, 2018
203,430,778

 
20

 
1,195,401

 
(684,616
)
 
(388
)
 
19,733

 
530,150

Issuance of common stock, net of offering costs
42,199

 

 
113

 

 

 

 
113

Stock-based compensation

 

 
1,206

 

 

 

 
1,206

Net loss

 

 

 
(10,899
)
 

 
(1,300
)
 
(12,199
)
Other comprehensive income

 

 

 

 
115

 

 
115

Balance, September 30, 2018
203,472,977

 
$
20

 
$
1,196,720

 
$
(695,515
)
 
$
(273
)
 
$
18,433

 
$
519,385

 
Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest in
Subsidiary
 
Total
Stockholders

Equity
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
 
 
 
 
Balance, December 31, 2018
203,599,892

 
$
20

 
$
1,198,769

 
$
(688,653
)
 
$
(2,138
)
 
$
17,011

 
$
525,009

Issuance of common stock, net of offering costs
1,052,040

 

 
175

 

 

 

 
175

Stock-based compensation

 

 
1,246

 

 

 

 
1,246

Net loss

 

 

 
(10,946
)
 

 
(1,879
)
 
(12,825
)
Other comprehensive income

 

 

 

 
374

 

 
374

Increase in ownership in subsidiary

 

 
228

 

 

 
(228
)
 

Balance, March 31, 2019
204,651,932

 
20

 
1,200,418

 
(699,599
)
 
(1,764
)
 
14,904

 
513,979

Issuance of common stock, net of offering costs
3,214

 

 
4

 

 

 

 
4

Stock-based compensation

 

 
918

 

 

 

 
918

Net loss

 

 

 
(5,383
)
 

 
(1,711
)
 
(7,094
)
Other comprehensive income

 

 

 

 
324

 

 
324

Balance, June 30, 2019
204,655,146

 
20

 
1,201,340

 
(704,982
)
 
(1,440
)
 
13,193

 
508,131

Issuance of common stock, net of offering costs
64,849

 

 
107

 

 

 

 
107

Stock-based compensation

 

 
892

 

 

 

 
892

Net loss

 

 

 
(4,334
)
 

 
(1,711
)
 
(6,045
)
Other comprehensive loss

 

 

 

 
(618
)
 

 
(618
)
Balance, September 30, 2019
204,719,995

 
$
20

 
$
1,202,339

 
$
(709,316
)
 
$
(2,058
)
 
$
11,482

 
$
502,467

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

Clean Energy Fuels Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands; Unaudited)
 
Nine Months Ended
September 30,
 
2018
 
2019
Cash flows from operating activities:
 
 
 
Net loss
$
(14,887
)
 
$
(25,964
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization expense
39,496

 
37,331

Provision for doubtful accounts, notes and inventory
1,294

 
1,071

Stock-based compensation expense
4,312

 
3,056

Change in fair value of derivative instruments
(101
)
 
4,854

Derivative settlement loss

 
(210
)
Amortization of discount and debt issuance cost
55

 
(555
)
Loss (gain) on disposal of property and equipment
1,210

 
(4,043
)
Loss from formation of equity method investment
1,163

 

Loss from equity method investments
2,739

 
123

Right-of-use asset amortization

 
2,597

Changes in operating assets and liabilities:
 
 
 
Accounts and other receivables
(6,605
)
 
3,947

Inventory
(2,403
)
 
2,799

Prepaid expenses and other assets
260

 
(4,593
)
Operating lease liabilities

 
(3,053
)
Accounts payable
(2,374
)
 
(3,215
)
Deferred revenue
2,790

 
(3,121
)
Accrued expenses and other
2,055

 
(6,421
)
Net cash provided by operating activities
29,004

 
4,603

Cash flows from investing activities:
 
 
 
Purchases of short-term investments
(293,599
)
 
(138,260
)
Maturities and sales of short-term investments
340,284

 
137,896

Purchases of and deposits on property and equipment
(14,209
)
 
(12,252
)
Payments on and proceeds from sales of loans receivable
388

 
556

Cash received from sale of certain assets of subsidiary, net
871

 
4,973

Proceeds from disposal of property and equipment
530

 
6,569

Net cash provided by (used in) investing activities
34,265

 
(518
)
Cash flows from financing activities:
 
 
 
Issuances of common stock
83,433

 
286

Fees paid for issuances of common stock
(993
)
 

Proceeds from debt instruments
8,243

 
3,694

Repayment of finance lease obligations and debt instruments
(31,066
)
 
(5,066
)
Payments for debt issuance costs

 
(29
)
Net cash provided by (used in) financing activities
59,617

 
(1,115
)
Effect of exchange rates on cash, cash equivalents and restricted cash
(74
)
 
109

Net increase in cash, cash equivalents and restricted cash
122,812

 
3,079

Cash, cash equivalents and restricted cash, beginning of period
37,208

 
34,624

Cash, cash equivalents and restricted cash, end of period
$
160,020

 
$
37,703

Supplemental disclosure of cash flow information:
 
 
 
Income taxes paid
$
171

 
$
36

Interest paid, net of approximately $169 and $391 capitalized, respectively
$
9,182

 
$
4,913

            See accompanying notes to condensed consolidated financial statements.

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Table of Contents

Clean Energy Fuels Corp. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share and per gallon 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 September 30, 2019, results of operations, comprehensive income (loss), and stockholders' equity for the three and nine months ended September 30, 2018 and 2019, and cash flows for the nine months ended September 30, 2018 and 2019. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine month periods ended September 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, condensed consolidated statements of operations, and condensed consolidated statements of cash flows to conform to the current period presentation. These reclassifications had no material effect 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.



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Table of Contents


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 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. The table below presents the Company’s revenue disaggregated by revenue source.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
Volume -related (1)
$
67,827

 
$
67,869

 
$
197,805

 
$
208,667

Station construction sales
9,359

 
6,431

 
20,938

 
15,544

Alternative fuels excise tax credit (“AFTC”)

 

 
26,863

 

Other
134

 
134

 
4,584

 
239

   Total revenue
$
77,320

 
$
74,434

 
$
250,190

 
$
224,450

(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 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 nine months ended September 30, 2019, changes in the fair value of commodity swaps and customer fueling contracts amounted to a gain of $1,129 and a loss of $3,267, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price of customer orders for which the work has not been performed. As of September 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was $9,992, 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 nine months ended September 30, 2019, were not materially affected by any factors outside the normal course of business.







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As of December 31, 2018 and September 30, 2019, the Company’s contract balances were as follows:
 
December 31, 2018
 
September 30, 2019
Accounts receivable, net
$
68,865


$
65,349

 
 
 
 
Contract Assets - Current
$
656

 
$
1,924

Contract Assets - Noncurrent
3,825

 
3,568

   Contract Assets - Total
$
4,481

 
$
5,492

 
 
 
 
Contract Liabilities - Current
$
5,513

 
$
4,365

Contract Liabilities - Noncurrent
9,844

 
7,229

   Contract Liabilities - Total
$
15,357

 
$
11,594

Accounts Receivable, Net
"Accounts receivable, 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 nine months ended September 30, 2018 related to the Company’s contract liability balances as of December 31, 2017 was $1,636. The decrease in the contract liability balances for the nine months ended September 30, 2019 is primarily driven by billings in excess of revenue recognized, offset by $4,418 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 fueling compressor manufacturing 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

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a loss of $817 and income of $415 from this investment for the three months ended September 30, 2018 and 2019, respectively, and a loss of $2,964 and $31 for the nine months ended September 30, 2018 and 2019, respectively. The Company has an investment balance in SAFE&CEC S.r.l. of $23,372 and $23,255 as of December 31, 2018 and September 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 September 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 a 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 a delayed draw 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 outstanding principal under the 2019 Convertible Note bears interest at a rate of 12.0% per annum, and all unpaid principal and accrued interest under the 2019 Convertible Note is due on the earlier of December 31, 2019, subject to extension at the Company's discretion, or the occurrence of an event of default (subject to notice requirements and cure periods in certain circumstances). In connection with the 2019 Convertible Note, NG Advantage issued to the Company a warrant to purchase 86,879 common units. During the three months ended September 30, 2019, NG Advantage drew an additional $4,400 under the 2019 Convertible Note. As of September 30, 2019, NG Advantage had an outstanding balance of $13,088 under the 2019 Convertible Note. This intercompany transaction has been eliminated in consolidation.
On October 1, 2019, NG Advantage drew an additional $1,000 under the 2019 Convertible Note.
The Company recorded a loss attributable to the noncontrolling interest in NG Advantage of $1,300 and $1,711 for the three months ended September 30, 2018 and 2019, respectively and $4,235 and $5,301 for the nine months ended September 30, 2018 and 2019, respectively. The value of the noncontrolling interest was $17,011 and $11,482 as of December 31, 2018 and September 30, 2019, respectively.




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Note 4—Cash, Cash Equivalents, and Restricted Cash
Cash, cash equivalents and restricted cash as of December 31, 2018 and September 30, 2019 consisted of the following:
 
December 31,
2018
 
September 30,
2019
Current assets:
 
 
 
   Cash and cash equivalents
$
29,844

 
$
32,074

   Restricted cash - standby letter of credit
30

 
31

   Restricted cash - held in escrow
750

 
750

      Total cash, cash equivalents and current portion of restricted cash
$
30,624

 
$
32,855

 
 
 
 
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

 
$
37,703

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 $30,762 as of December 31, 2018 and September 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 on available-for-sale 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 September 30, 2019, the Company believes the carrying values for its available-for-sale debt securities are properly recorded.
Short-term investments as of December 31, 2018 consisted of the following:

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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 September 30, 2019 consisted of the following:
 
Amortized Cost
 
Gross Unrealized
Gains (Losses)
 
Estimated Fair
Value
Municipal bonds and notes
$
2,986

 
$

 
$
2,986

Zero coupon bonds
32,875

 
6

 
32,881

Corporate bonds
30,372

 
(2
)
 
30,370

Certificates of deposit
518

 

 
518

   Total short-term investments
$
66,751

 
$
4

 
$
66,755


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 5.0 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 these derivative instruments are recognized in "Product revenue" in the accompanying condensed consolidated statements of operations.
During the nine months ended September 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 determined 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 September 30, 2019 consisted of the following:

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Gross Amounts Recognized
 
Gross Amounts Offset
 
Net Amount Presented
Assets:
 

 
 

 
 

Commodity swaps:
 
 
 
 
 
  Current portion of derivative assets, related party
$
931

 
$

 
$
931

  Long-term portion of derivative assets, related party
5,742

 

 
5,742

Fueling agreements:
 
 
 
 
 
  Prepaid expenses and other current assets
170

 

 
170

  Notes receivable and other long-term assets, net
432

 

 
432

      Total derivative assets
$
7,275

 
$

 
$
7,275

As of December 31, 2018 and September 30, 2019, the Company had a total volume on open commodity swap contracts of 25.0 million and 23.1 million diesel gallons at a weighted -average price of approximately $3.18 and $2.65 per gallon, respectively.
The following table reflects the weighted-average price of open commodity swap contracts as of December 31, 2018 and September 30, 2019, by year with associated volumes, respectively:
 
 
December 31, 2018
 
September 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

 
1,250,000

 
$
2.73

2020
 
5,000,000

 
$
3.18

 
4,986,000

 
$
2.68

2021
 
5,000,000

 
$
3.18

 
5,000,000

 
$
2.68

2022
 
5,000,000

 
$
3.18

 
5,000,000

 
$
2.68

2023
 
5,000,000

 
$
3.18

 
5,000,000

 
$
2.68

2024
 
1,875,000

 
$
3.18

 
1,870,000

 
$
2.38


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

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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 September 30, 2019, respectively:
 
 
December 31, 2018
 
September 30, 2019
Significant Unobservable Inputs
 
Input Range
 
Weighted Average
 
Input Range
 
Weighted Average
ULSD Gulf Coast Forward Curve
 
$1.71 - $1.79
 
$1.75
 
$1.69 - $1.75
 
$1.72
Historical Differential to PADD 3 Diesel
 
$0.76 - $1.16
 
$0.89
 
$0.76 - $1.16
 
$0.91
Historical Differential to PADD 5 Diesel
 
$1.22 - $2.12
 
$1.55
 
$1.25 - $2.30
 
$1.72
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 September 30, 2019:
 
 
September 30, 2019
Significant Unobservable Inputs
 
Input Range
 
Weighted Average
ULSD Gulf Coast Forward Curve
 
$1.69 - $1.75
 
$1.72
Historical Differential to PADD 5 Diesel
 
 $1.25 - $2.30
 
$1.72
Historical Differential to PADD 1B Diesel
 
 $1.00 - $1.60
 
$1.28
The Company’s liability-classified warrants (or "derivative 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 September 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 September 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


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September 30, 2019
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
 
Available-for-sale debt securities (1):
 
 
 
 
 
 
 
 
Municipal bonds and notes
 
$
2,986

 
$

 
$
2,986

 
$

Zero coupon bonds
 
32,881

 

 
32,881

 

Corporate bonds
 
30,370

 

 
30,370

 

Certificates of deposit (1)
 
518

 

 
518

 

Commodity swap contracts (2)
 
6,673

 

 

 
6,673

Embedded derivatives (3)
 
602

 

 

 
602

Liabilities:
 
 
 
 
 
 
 
 
Warrants (4)
 
$
2,666

 
$

 
$

 
$
2,666

(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

 

 
101

 
Balance as of September 30, 2018
$

 
$

 
$
(435
)
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
$
10,332

 
$

 
$
(1,079
)
 
Settlements, net
210

 

 

 
Gain (loss) included in earnings
(3,869
)
 
602

 
(1,587
)
 
Balance as of September 30, 2019
$
6,673

 
$
602

 
$
(2,666
)
 
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 September 30, 2019. The fair values of these debt instruments were estimated using a DCF 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.

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Note 8—Other Receivables
Other receivables as of December 31, 2018 and September 30, 2019 consisted of the following:
 
December 31,
2018
 
September 30,
2019
Loans to customers to finance vehicle purchases
$
276

 
$
1,587

Accrued customer billings
6,261

 
6,757

Fuel tax credits
434

 
169

Other
8,573

 
597

   Total other receivables
$
15,544

 
$
9,110


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 September 30, 2019 consisted of the following:
 
December 31,
2018
 
September 30,
2019
Raw materials and spare parts
$
34,890

 
$
31,040

Finished goods
85

 

   Total inventory
$
34,975

 
$
31,040


Note 10—Land, Property and Equipment
Land, property and equipment as of December 31, 2018 and September 30, 2019 consisted of the following:
 
December 31,
2018
 
September 30,
2019
Land
$
3,681

 
$
3,595

LNG liquefaction plants
94,633

 
94,633

Station equipment
319,119

 
314,457

Trailers
75,901

 
75,317

Other equipment
97,268

 
99,235

Construction in progress
73,485

 
80,998

 
664,087

 
668,235

Less: accumulated depreciation
(313,519
)
 
(345,365
)
   Total land, property and equipment, net
$
350,568

 
$
322,870

Included in "Land, property and equipment, net" are capitalized software costs of $29,344 and $30,315 as of December 31, 2018 and September 30, 2019, respectively. Accumulated amortization of the capitalized software costs is $22,472 and $25,529 as of December 31, 2018 and September 30, 2019, respectively.
The Company recorded amortization expense related to the capitalized software costs of $1,026 and $961 for the three months ended September 30, 2018 and 2019, respectively, and $2,699 and $3,057 for the nine months ended September 30, 2018 and 2019, respectively.

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As of September 30, 2018 and 2019, $1,660 and $2,181, 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 September 30, 2019 consisted of the following:
 
December 31,
2018
 
September 30,
2019
Accrued alternative fuels incentives
$
6,923

 
$
7,041

Accrued employee benefits
2,248

 
3,158

Accrued interest
78

 
190

Accrued gas and equipment purchases
12,833

 
9,205

Accrued property and other taxes
3,397

 
3,982

Accrued salaries and wages
8,609

 
6,624

Other
14,381

 
11,199

   Total accrued liabilities
$
48,469

 
$
41,399


Note 12—Debt
Debt obligations as of December 31, 2018 and September 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

 
September 30, 2019
 
Principal Balances
 
Unamortized Debt Financing Costs
 
Balance Net of Financing Costs
7.5% Notes
$
50,000

 
$
27

 
$
49,973

NG Advantage debt
28,426

 
112

 
28,314

SG Facility
300

 

 
300

Other debt
854

 

 
854

Total debt
79,580

 
139

 
79,441

Less amounts due within one year
(55,482
)
 
(85
)
 
(55,397
)
Total long-term debt
$
24,098


$
54

 
$
24,044

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

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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 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 September 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 September 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, had 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”). There was no activity or borrowings under this Credit Facility during the nine months ended September 30, 2018 and 2019, and there were no amounts outstanding under the Credit Facility as of September 30, 2019. The Credit Facility matured and was canceled on September 30, 2019.
Interest on the Plains Note was payable monthly and accrued 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 were certain covenants and events of default associated with the Plains LSA. No events of default under the Plains LSA had occurred as of September 30, 2019.
SG Credit Agreement
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 (“SG Loans”) in support of its Zero Now truck financing program. Under the Credit Agreement, the Company is permitted to use the proceeds from the SG 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 SG 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. As of September 30, 2019, the Company had $300 outstanding on the SG Facility and no events of defaults had occurred.

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On October 31, 2019, the Company drew an additional $1,000 on the SG Facility.
TOTAL Credit Support Agreement
On January 2, 2019, the Company entered into 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 SG 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

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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 September 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
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
Weighted-average common shares outstanding
203,469,222

 
204,712,888

 
172,946,896

 
204,522,984

Dilutive effect of potential common shares from restricted stock units and stock options

 

 

 

Weighted-average common shares outstanding - diluted
203,469,222

 
204,712,888

 
172,946,896

 
204,522,984

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
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
Stock options
9,417,492

 
10,051,402

 
9,417,492

 
10,051,402

Convertible notes
13,409,242

 
3,164,557

 
13,409,242

 
3,164,557

Restricted stock units
2,428,731

 
1,257,873

 
2,428,731

 
1,257,873

   Total
25,255,465

 
14,473,832

 
25,255,465

 
14,473,832




Note 14—Stock-Based Compensation

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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
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2019
 
2018
 
2019
Stock-based compensation expense, net of $0 tax in 2018 and 2019
$
1,206

 
$
892

 
$
4,312

 
$
3,056

As of September 30, 2019, there was $3,616 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 1.51 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. ("Total"), 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 September 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 September 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 $68 for the three months ended September 30, 2018 and 2019, respectively, and $266 and $194 for the nine months ended September 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

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for the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018 was primarily due to a reduction in the Company’s expected state tax expense. The effective tax rates for the three and nine months ended September 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 nine months ended September 30, 2018 by $2,178. 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 nine months ended September 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 effect 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 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
New Lease Accounting Standard (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 effect of the adoption) whereby 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 the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether the Company has the right to direct the use of the asset. The commencement date of the contract is the date 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 lease 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; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
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 statements 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, whereby depreciation on assets under finance leases is recorded in “Depreciation and

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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 leased office space from the estate of T. Boone Pickens in Dallas, Texas. The lease, which expired in October 2019, called 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 lease liabilities and are recorded as a period expense when incurred.
Lessee Accounting
As of September 30, 2019, the Company’s finance and operating lease asset and liability balances were as follows:
 
September 30, 2019
Finance leases:
 
Land, property and equipment, gross
$
6,035

Accumulated depreciation
(2,072
)
Land, property and equipment, net
$
3,963

 
 
Current portion of finance lease obligations
$
642

Long-term portion of finance lease obligations
3,140

Total finance lease liabilities
$
3,782

 
 
Operating leases:
 
Operating lease right-of-use assets (1)
$
24,043

 
 
Current portion of operating lease obligations
$
3,176

Long-term portion of operating lease obligations
21,901

Total operating lease liabilities
$
25,077

(1) The Company’s operating lease ROU assets are comprised of the following:
 
September 30, 2019
 
Assets
 
Liabilities
Real estate for fueling stations
$
18,161

 
$
18,161

LNG plant, office spaces and warehouses
5,874

 
6,908

Office equipment
8

 
8

Total operating lease right-of-use assets
$
24,043

 
$
25,077

The components of lease expense for finance and operating leases consisted of the following:

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Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Finance leases:
 
 
 
Depreciation on assets under finance leases
$
146

 
$
437

Interest on lease liabilities
44

 
143

Total finance leases expense
$
190

 
$
580

 
 
 
 
Operating leases:
 
 
 
Lease expense
$
1,557

 
$
4,657

Lease expense on short-term leases
62

 
1,649

Variable lease expense
712

 
2,041

Sublease income
(52
)
 
(155
)
Total operating leases expense
$
2,279

 
$
8,192

Supplemental information on finance and operating leases is as follows:
 
 
 
Nine Months Ended September 30, 2019
Operating cash outflows from finance leases

 
$
(143
)
Operating cash outflows from operating leases

 
$
(4,109
)
Financing cash outflows from finance leases

 
$
(1,024
)