Clean Energy Fuels Corp (CLNE) 2010 Q4 法說會逐字稿

Greetings, and welcome to the Clean Energy Fuels fourth quarter fiscal 2010 earnings conference call.

(Operator Instructions).

As a reminder, this conference is being recorded. It is now my please to introduce your host, Ina McGuinness. Thank you, Ms. McGuinness, you may now begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and year ended December 31, 20 10. If you did not receive the release, it's available on the Investor Relations section of the company's website at www.cleanenergyfuels.com. This call is being webcast, and a replay will be available on the website for 30 days.

Before we begin, we would like to remind you some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects, as well as words such as believe, intend, expect, plan, anticipate, and similar variations identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance, and the company -- actual results could differ materially from those contained in such statements.

Several factors that could cause or contribute to such differences are described in detail in the risk factors section of Clean Energy's Form 10-K that will be filed later today. These forward-looking statements speak only as of the date of this release, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release.

The company's non-GAAP EPS and adjusted EBITDA will be reviewed on this call, and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, and should not be considered as a substitute or superior to GAAP results. The direct comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBITDA, and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today.

Participating on today's call for the company is President and Chief Executive Officer Andrew Littlefair, and Chief Financial Officer Rick Wheeler. With that, I will turn the call over to Andrew.

Thank you, Ina, and good afternoon, everyone. Today, we reported a very strong quarter in 2010. For the year, our revenues grew 61%, and our adjusted EBITDA grew 37%.

I'd like to begin this call by outlining some of the major strategic accomplishments of 2010. As you know, we believe the demand for natural gas fueling is accelerating, both for CNG and LNG in North America, as well as globally. Our primary goal is to be positioned to take advantage of this opportunity. We made great progress by completing several acquisitions and securing a partnership that we believe will maintain our industry leadership.

I'll start with our acquisition of IMW Industries, a leading global supplier of CNG equipment for vehicle fueling. Our acquisition of IMW was driven by three desires. First, we wanted to ensure we could satisfy our internal compressor needs, since compressors are the most important piece of the equipment for a CNG station. As the adoption of natural gas vehicles has increased, our CNG station construction backlog has increased, and our compressor requirements have risen as well. Second, the acquisition of IMW allows us the ability to provide our customers with an equipment-only offering. Since some customers just want a station, we can now offer them a high quality and low-cost solution. Third, IMW gives us the ability to participate in the global growth of natural gas vehicle fueling. IMW has a well-known and respected reputation in the global arena, with over 1,200 units in more than 24 countries. In 2010, 53% of IMW's sales came from outside of North America.

And, we've made great progress in China, where the task of building 4,000 natural gas fueling stations has been assigned to just three local distribution gas companies. We're working with two of the three so far, and hope to supply a significant amount of their compressor needs in the future. In July 2010, we signed an agreement with Pilot Flying J to build, own and operate public access LNG fueling facilities at agreed upon Pilot Flying J travel centers throughout North America. They are the largest truck fueling operator in the country with 550 locations. We believe that, as additional heavy-duty natural gas engines become available, there will be substantial adoption of class-A trucks that run on LNG. And, by partnering with Pilot Flying J, we are in a good position to build LNG stations along interstate highway corridors to fuel these trucks.

We also acquired North Star in December 2010. North Star provides LNG station design, construction operations, and maintenance services. North Star has built over 65% of all the LNG stations in the US. North Star is a leader in LNG fueling system technologies, being the manufacturer of one of only two weights and measures certified LNG dispensers. We will be well positioned with North Star for the rollout of LNG stations at Pilot Flying J travel centers.

Given these strategic moves, we now can offer customers a variety of options from what we call our customer solutions matrix. We can offer full-service fueling contracts that include construction, operations, maintenance, government grant assistance, vehicle funding, and fuel contracts. For customers who want only equipment and want to do their own maintenance, we can sell them equipment at a very competitive price. And, we can offer everything in between. We can offer CNG, LNG, or renewable bio methane in North America, and, where it makes sense, internationally. We're the only company that can say this.

BAF, our vehicle conversion business, converted 1,820 AT&T vans and 500 Verizon vans in 2010. We continue to work with other major fleets to place orders in 2011.I'm pleased to report that BAF is now the only certified Ford qualified vehicle modifier for CNG systems. All BAF converted vehicles now carry a full Ford factory warranty. BAF has been selected by Knapheide Manufacturing as the exclusive provider of after market CNG fuel systems for light-duty Ford trucks configured with Knapheide service bodies. BAF also recently made an investment in Servotech. That will help us design future fueling systems with Ford. Servotech will reduce our development time for new Ford vehicle gaseous fuel systems to weeks, from months.

As you know, we did get the vehicle excise tax credit of $0.50 per gallon retroactive to the beginning of 2010, and extended through 2011. Of course, we're very pleased to have this additional revenue and legislative support, but it's important to remember that our model does not depend on these subsidies. In the refuse sector, the incremental cost of a natural gas refuse truck can be as low as $10,000. With more than a $1 per gallon savings, fleets are recognizing a pay back in less than a year, and they realize significant savings over the remaining life of the truck. This explains why, in the refuse sector, our 2010 volumes were up 50% over 2009.

Case in point, since we announced our agreement with Republic, we've brought on six new sites and we're working on six more. We've also are in the process of reviewing about 25 of their largest sites with them to see where natural gas makes sense. There are also several RFPs out on the street right now for other refuse projects, including Oyster Bay, Lafayette and Shreveport in Louisiana, Augusta, Georgia, El Paso and Dallas, Texas. We believe seeing the refuse sector moving forward natural gas deployments is a strong testament to the fact that these programs work without incentives.

One of the other most promising markets where the economics are also quite compelling, and work without any vehicle tax credits, is trucking. You need only look at the latest diesel price in Los Angeles of more than $4.15 per gallon to know that fleet operators are feeling the pressure to find cost savings. For a national fleet operator of class-A trucks that each use about 1,000 gallons per month, he can cover the incremental monthly cost of leasing an LNG truck compared to diesel and realize an additional incremental monthly savings. And, that's why national fleets, including Wendy's, Coca-Cola, Ryder, Oxbo, and Pepsi are now currently testing natural gas trucks. Of course, we believe that our country can and should accelerate the use of natural gas for vehicles to begin to address our dangerous addiction to foreign oil. We believe that there will be another version of the Natural Gas Act introduced this spring. But, I'm done trying to predict when we will see this bill get final approval, but we do see increasing support. It hasn't hurt our case to see oil prices over $100 a barrel, which has increased the spread between oil and natural gas about 25 to 1.

Turning to some of our recent deals, you likely saw our UPS announcement. This is a good example of how fueling corridors will develop. UPS has selected Clean Energy to design, build, own, and operate an LNG fueling station that will fuel their new fleet of 48 LNG package transportation trucks, which will travel between key destinations in the L.A. basin. When operational, their LNG fuel requirements, just for those 48 trucks, are expected to exceed 1.2 million gallons per year.

As a reminder, today there are more than 1,300 class-A trucks in operation in the US, and we fuel approximately 90% of them. Here, let me digress a moment and just explain the way the infrastructure works. I know several months ago, maybe even almost a year ago, a we made an announcement that we were developing station -- or selected to develop a station at DFW Airport for their new rental car center. We built that station, and DFW had to go out and purchase their buses. Those buses arrived right about the holiday season, and those buses took awhile to get put into service, but, today, -- and, in January, a handful of buses were in service. Today, now they have 32 new CNG buses in service with eight more to be delivered later this month. So, now, that station does 2,000 gallons a day, and this equates to about 550,000 to 650,000 gallons a year.

The Parking Spot, which contracted with us awhile back, has ordered 63 new CNG shuttles, 12 of which have arrived at Denver Airport. We expect all 63 to be in place this month, adding 300,000 gallons per year to our existing infrastructure. In the transit sector, we took over two more LA MTA stations during the year. These two stations total approximately 9 million gallons annually. We are also scheduled to begin operations on another three stations in the first two quarters of 2011 that will utilize about 10 million gallons on an annualized basis. As you recall, we have no invested capital in these deals, so, although there are lower margin, they're still economic for us. For the year, we bid on 10 transit deals. We won eight of them and lost two. We think this is a pretty Goodwin rate, and we're pleased that the LA MTA win more than offsets the gallons on the two projects we lost.

Let me finish up my section of today's remarks with an update on the pipeline. Looking back on 2010, we built 55% more stations than in 2009. In the fourth quarter alone, we completed 20 stations while continuing to add construction and engineering capabilities. For the year, we built 45 stations. Already, we built eight stations in the first quarter of 2011, and that compares to two in the first quarter of last year.

Projects in our pipeline are approximately 330. A lot of work has been done for a project to meet our criteria for being added to the pipeline, and within the pipeline, there are several categories of projects. They are either in negotiation, validation, or are qualified prospects. Of the 330, 150 are in the validation and negotiation stages. We now have 61 projects on the carpet. Those are stations under contract, up from 52 three weeks ago. And, we believe we will exceed last year's station construction record. Now, with that, let me turn the call over to Rick.

Thanks, Andrew. Before I review our financial results, I would like to point out that all my references to our results will be comparing the fourth quarter of 2010 to the fourth quarter of 2009 and the year ended December 31, 2010, to the year ended December 31, 2009, unless otherwise specified.

For the quarter, our revenues were $83.2 million, up from $42.2 million. For 2010, revenue totaled $211.8 million, which is up from $131.5 million a year ago. BAF contributed $6.1 million of our fourth quarter increase, and IMW contributed another $14.5 million. IMW also sold to Clean Energy $5.6 million of product during the quarter, which gets eliminated in our consolidated financial statements. For 2010, BAF contributed $35.4 million to our revenue increase, and IMW contributed $17.8 million, which excludes $6.7 million of sales to Clean Energy.

During the fourth quarter of 2010, we recorded $16 million of VTAC revenues. This amount represents our claims for credits earned in all of 2010, as the credit was reinstated in the fourth quarter of 2010 and made retroactive to January 1. The credit was also extended through 2011, when it was reinstated.

Adjusted EBITDA in the fourth quarter of 2010 was $20.2 million, which compares to $5.6 million in the fourth quarter of 2009. For 2010, adjusted EBITDA was $21.3 million, compared to $15.5 million last year. Adjusted EBITDA is a financial measure we developed to highlight our operating results excluding certain large, non-cash or non-recurring charges that are not core to our business, including the amounts we are incurring for our series one warrant valuation, our stock-based compensation charges for our options, and certain tax benefits, foreign currency gains, and impairment charges we incurred in 2010. Adjusted EBITDA is described in more detail in the press release we issued earlier today.

We had earnings of $0.17 per share on a non-GAAP basis in the fourth quarter of 2010, which compares with non-GAAP earnings of $0.02 per share in the fourth quarter of last year. For 2010, non-GAAP loss per share was $0.04 versus $0.03 per share for 2009. Gross margin this quarter was $33 million and was $15.9 million in the prior period. BAF contributed $1.7 million towards this increase, and IMW contributed $3 million. For 2010, our margin was $69.9 million, and it was $48.6 million in 2009. For 2010, BAF contributed $10 million, and IMW contributed $3.8 million to our margin increase. Our margin per gallon on our fuel sales were $0.26 in fourth quarter of 2010, which compares with $0.32 in the fourth quarter of 2009.

Our net income on a GAAP basis for the fourth quarter was $13.8 million, or $0.18 per share. This compares to a net loss of $1.9 million or $0.03 per share. Keep in mind, we recorded our full 2010 VTAC amount in the fourth quarter of 2010. The increase is also related to the change in the amounts we recorded for valuing our series one warrants between periods. We recorded a non-cash gain of $4.4 million in the fourth quarter 2010, and a non-cash gain of only $400,000 in the fourth quarter of 2009.

For 2010, net loss for the period was $2.5 million or $0.04 per share, which compares to $33.2 million or $0.60 per share. The 2010 amount included a non-cash gain of $10.3 million related to valuing the series 1 warrants, non-cash stock-based compensation charges of $11.9 million, $ 2.2 million of impairment charges, $1.9 million of foreign currency gains on the notes we issued to purchase IMW, and an AMT refund of $1.3 million recorded in the first quarter of 2010. The 2009 amount includes $17.4 million of non-cash series one warrant charges and $14.1 million of non-cash stock-based compensation charges. During the fourth quarter of 2010, approximately $1.2 million of the series one warrants were exercised, so the magnitudes of our gains and losses related to valuing the remaining $2.1 million series one warrants should be less as we go forward.

Volumes during the quarter rose to 31.7 million gallons, up from 29.5 million gallons. For 2010, we delivered 122.7 million gallons, which is up 21% from 101 million gallons in 2009. And, with that, Operator, please open the call to questions.

Thank you. We'll now be conducting a question and answer session. (Operator Instructions) One moment, please, while we poll for questions. Our first question comes from Rob Brown from Craig-Hallum.

Good afternoon.

Good afternoon, Rob.

I'm wondering if you could give us a little color on your pipeline. Has that amount accelerated since the fuel price spike, or has that been growing pretty consistently? Maybe give us a sense of how much difference you're seeing in terms of the interest level with high fuel prices?

Well, it's interesting. Our Vice President of Sales has had five or six meetings in Connecticut today. He noticed a fuel price at $4.25. So, we are getting a lot of -- seems like, once again, we knew that when fuel went to $4, that really was the tipping point. Now, on the -- specifically on the pipeline, I think since the last time I talked to you, the pipeline grew from about -- I believe it was 280 to now it's standing at 330. So, we're seeing an increase. I can't break it down for you, Rob. In the last three weeks or four weeks, how much it's grown, but since the last three or four months it's gone up by 20% or 30%.

Okay, good. Turning over to BAF, you mentioned you made an investment in a company, I think you said Servotech. How much was that investment, and maybe help us understand how that accelerates your development pipeline that you mentioned?

That was $1.2 million, and I think that's outlined in the documents we --

19.9% interest.

Servotech is unique because they are headquartered there with Ford in Dearborn, and they're one of the few companies that has very close working relationship with Ford on the development of fuel systems. And so, if you go back with me, Rob, a few years ago, and really for a lot of the history in the natural gas vehicle business, we've had kit companies and others in the business that had to essentially hire smart guys to go in and re-engineer the codes and crack the codes of the auto companies.

Well, in this case, Servotech actually has a close relationship with Ford and has access to those codes. So, for instance, on our latest project development that we did working closely with Servotech, we literally were able to get that put in place, get a new -- the new fuel system algorithms, et cetera, all put to bed in a matter of three or four weeks. Which used to take us three or four months. So, this will save us a lot of money, and we'll be able to bring more product to market faster. And we're doing with it somebody that Ford thinks enough of that has provided them with this kind of access. I think it's a pretty important step.

Great. Thank you.

Thank you. Our next question comes from Graham Mattison from Lazard Capital Markets.

Hi, good afternoon, guys.

Good afternoon.

Just a quick question for Rick on the margin per gallon, going through a lot of figures at the end there. You said the margin per gallon was $0.26 in the fourth quarter. Did that include contributions from VETC?

No. That excludes VETC.

If you were to add VETC in there to compare it to quarters, I guess prior to 2010, what would the margin be?

It would probably add another $0.12 or $0.13 a gallon to the fourth quarter number. The $0.26 would probably go to the mid $0.30s, upper $0.30s.

Great. And then staying on BAF, can you give a sense of what the -- I found the revenues in the K, but a sense of what the gross margins were in the quarter? And then, if possible, a sense of what the backlog and the outlook for that is in 2011?

Rick's going to look at the -- on the gross margins. Graham, we continue to push sales through there, and we have a continuing relationship with AT&T, and a continuing relationship with Verizon and some other very large fleets. So, this can be a bit lumpy, but those companies have committed that they're moving forward, and even looking at ramping up their numbers, and so we feel pretty good about those two large customers. We have about three or four other very large fleets that are just beginning to take some vehicles to test. So, we like the outlook for 2011.

Great. And then, Rick, did you find the --

Yes, basically, for the fourth quarter there, gross margin was about $4 million, and for the year it was about $12 million.

All right, great, thank you very much.

Thank you. Our next question comes from Brian Gamble from Simmons & Company.

Afternoon, guys. How are you doing?

Good.

Back to the $0.26 a gallon. Rick, the $0.26 actually compares with what you've reported the last three quarters because that was all excluding VETC, correct?

Absolutely. Because there wasn't any VETC in any of the 2010 quarters.

Maybe walk me through Q2 to Q4, the decline from $0.35 to $0.31 to $0.26, and then talk about maybe your expectations for where the volumes are coming from in '11 and what that should ultimately do to that number.

Sure. Essentially it's the phenomenon we've talked about, that is the transit O&M volumes become a bigger piece of our overall volumes. Since those are lower margins they're going to skew our market per gallon down. It's kind of the math of that happening as we brought on more LA MTA business and other transit that basically -- just more in the O&M bucket. With more LA MTA volumes coming on during 2011, as Andrew alluded to with those other sites that are coming on, as well as the LA MTA sites we brought on 2010 will be in 2011 for a full year instead of a partial year in '10. That's probably going to pull that number down some more.

We don't give guidance on that, as you know, but I certainly would offer up that the margin per gallon number is probably going to dip down some more in 2011, and our theory on where and when and how we get that back is the regional trucking and the other national fleets and deals Andrew alluded to earlier, that comes back into the mix,. And that's high volume-type business, and that's in our commercial retail world where our margins are higher. Hopefully, we will be able to offset the transit volumes coming on with the new retail margins, which are bigger, and get that number back up. So, that's going to be a little while as that transitions and happens. But that's our plan.

Andrew, maybe you could -- and you gave some decent detail on what you see going forward, and I totally appreciate the fact that you're not wanting to guess at the nat gas bill again. I know that's been frustrating for everybody. But maybe could you give your top two hopes for 2011 that have the best chance to come to fruition that would help you.

Sure. Let me speak to that, and I want to also quote a press conference that happened just moments ago in Washington. But on the federal legislation side, as much as -- I know you're asking me to walk back out on the plank again, here, but --

I would never do that.

No. But I feel very strongly that it's moving in the right direction, and that there will be a re-introduction of a nat gas act-like bill, very similar. It may be just a bit trimmer, but that reintroduction is going to happen relatively soon. We have lots of active support from Congressman Sullivan, Congressman Boren, Larsen, and you remember they were our leaders last time around. And two or three leading members on the House Ways and Means Committee. We know that those members have talked to leadership. Leadership wants this bill to come through the committee process, and that's fine. The Natural Gas Act, let's call it version 2, it's been drafted, it's being vetted, beginning to be vetted, a draft among those original co-sponsors. And I think that it will be introduced, maybe as early as the end of the month.

There's still a long way to go, having said that. The effort -- the House wants to take the lead on this first, then it will go through committees, and the it will, obviously, at some point go for a vote. And then it will go over to the Senate. Interestingly, today, and of course it has, I'm sure, a lot to do with what Americans are seeing at the pump, but let me just read what Speaker Boehner said at a press conference a few minutes ago. And this is a quote, he said "The days of big comprehensive bills I think should be over," Boehner said. "I'd rather deal with this in what I call bite-size chunks. Why wouldn't we have a bill to encourage vehicles to use natural gas and do it by itself? Why wouldn't we have a bill to encourage more oil and gas exploration where the royalties would go to support more green energy development? And why wouldn't we do that by itself? Why wouldn't we do a nuclear energy bill, for example, by itself?"

So, I take great, I guess, umbrage in the fact that you have the Speaker of the House talking about energy legislation and he leads with something talking about natural gas vehicles. I'm not sure we've been there before. So, I like that and feel strongly that this thing is going to happen. I think it has more support today than did it before.

Appreciate it.

Our next question comes from Eric Stein from Northland Capital Markets.

Hi, everyone. Thanks for taking the questions.

Hi, Eric.

You knew I would ask this question, but just bookkeeping, can you give the GGE breakdown between CNG, LNG, and bio methane in the quarter? And also, an approximate number of the [up-fits] in the quarter?

Sure, bio methane was $1.8 million. CNG was $21.4 million. And LNG was $8.5 million to get you to your $31.7 million. And BAF did almost 2,800 -- during the quarter or the year?

Either. I guess quarter. Quarter is fine.

Unfortunately, I have year.

2,800 for the year?

2,800 for the year.

Thanks a lot for that. I'm wondering could you touch on the construction revenue in the quarter. I mean, it was a noticeable number. Was that related to the North Star acquisition, or was that just project -- timing of completion of stations in the quarter?

More timing of completion. We're working on a couple of big projects for the LA MTA, where we're electrifying some of their compressors. The other big thing that's going on is our relationship with Republic where we're doing all these stations with them. In most instances, we're selling them the station and then doing O&M after that. So, a lot of those stations got done in the fourth quarter as well. So, it's kind of just timing coupled with our station activities picking up in general on the ones we're selling to our customers.

Okay. That's great. Maybe just turning to AT&T, I know they're over a quarter of the way through there. There are 8,000 up-fits that they want to do. I know they have more planned beyond that. Have they gotten to the point where they're considering the fueling station side of it? I know that you have the rights to do that. I'm just wondering, any thoughts on timing would be helpful.

We're underway in the final stages of building their first station. That's at Carson, California. And Eric, I can't remember, I know we looked at -- I think we're in the process of looking very closely doing three or four others. I believe it's in the Texas market and maybe in Florida. A little rusty there on that.

We have had, recently, a few very important meetings with AT&T to look at their further vehicle rollout and stations as a part of that. We showed them a program whereby we can put in mobile refueling and, essentially, very quickly put mobile refueling in virtually almost any location that they would like in a matter of weeks. So, we feel like we can address their infrastructure needs. We have to do more -- we have to nail more of them down, though.

And is it still their plan, to have a public aspect to those stations, eventually, as this takes shape?

Well, some of them will. You know, some locations lend themselves to public, and some don't. I believe the one in Carson, the first one out of the box, that's where we are doing a -- with public access. It just kind of depends on the location and how the piece of the property is oriented and whether or not it will work or not. I think they've been persuaded that they see it as a public good to provide public access where possible, and that, I think, they've embraced.

Okay. Thanks for that. Maybe just last question, just on the pipeline. In the past, you've talked about the mix being very much more supplying the fuel versus O&M. Is that still the case, even with the growth you've seen?

Well, it just kind of depends. For instance, we have three Flying J stations right now on the carpet that were under construction, and we have 12 others that we're looking at that I would say are in the pipeline. Those would all be, because of the nature of that business relationship, we're building the station and providing the fuel. Now, Republic, most of the cases of Republic, they've elected to buy equipment and enter into a long-term operations agreement with us, which is good for both parties. And we're selling them equipment, and that's a little bit different. So, it just kind of depends. We have probably 30 or 40 projects that are in the airport taxi realm. Those are all places where we'd supply fuel.

So, Eric, it kind of depends on the customer right now. As we do more national -- what I call national fleets, the big class-A shipping companies, those will all be fuel related, for the most part. Now, there will be certain of those that have their own fleets and they're going to want their own stations, but a lot of it won't be that way. So, I can't really give you a percentage breakout.

Understood. But like you said, as you fuel more of these national fleets it should skew more towards supplying the fuel?

That's, obviously, what I'd like to do, and -- but we've also adopted the philosophy of, if a customer just wants equipment, we'll sell equipment. If they want a certain level of service, we'll do that. If they want the full boat, we can do that. We can engineer and construct. So, we have now, what I said on the call, a matrix of services, and we're really the only ones that can do that. And I think that's good business to be able to provide the customer what they want.

Absolutely. Thanks a lot for the color.

Thank you. Our next question comes from Peter Christiansen from Bank of America Merrill Lynch.

Good afternoon. Peter here in for Steve Milunovich. It is a relates to SG&A and depreciation going forward with all these new acquisitions, should we think of this fourth quarter result as more of a -- what the normalized run rate should be going forward, or do you expect some other different trends there?

Yes, there's a couple things in there I would offer up that you should probably consider going forward. Our stock-based compensation, which is in there. In theory, it's probably going to go up a little bit. We issued some more options recently. There was $1.2 million of legal and accounting expenses we incurred to do all the acquisitions during 2010. That, in theory, will not recur again, but to the extent we do other acquisition, it may come back. So, that's a little bit of a wild card. The two impairment charges that are in there, in theory, those won't be back again. Probably $2.2 million you could pull out.

I guess we always are a little careful here just to caution everybody that we are a growth Company, and we are spending money to get legislation passed at both the federal and the state level, and do a lot of things that create industry awareness and growth and advancement, all that good stuff. So, we always tell people we're watching our money and trying to spend wisely, but we don't want to be penny wise and pound foolish. If there's an opportunity that we can go out to do something to help this business grow or be more successful long term, we're going do that. So, with all that said, if you pull out the extraordinary items I alluded to, that will get you somewhere close. And then just always know the caveats there, that we may do something that we think makes sense for the longer term as opposed to just watching every dime.

Do you see any potential acquisitions over the near term horizon?

Well, obviously, we can't comment on that.

We're just -- as you can tell from what we done 2010, we're looking to do anything we can to enhance our position or our advantage and put us in good stead to capture the lion's share of the growth that we think is coming. So, to the extent something like that presents itself, we would obviously look at it, but obviously, we can't comment on specifics.

Peter, the good news is that we're fortunate in that we get to look at a lot of things. So, we see a lot of equipment suppliers and fuel providers and have relationships with the fleets. And so, it wouldn't surprise me if you would see other acquisitions. What we did last year is we wanted to set ourselves up to be able to fully participate in what we see as a very exciting, growing market. And there are other opportunities out there, so we're looking at them very closely. Just like the Servotech type thing. It's small, but it's very strategic. And it really helps us, and it could really blossom to something much bigger.

Peter, couple other things to think about on SG&A. IMW was only in our numbers in 2010 for four months. They'll be in for a full year this year. Same thing with North Star. It was only in for two weeks during 2010. It'll be in for a full year in 2011. Plus, we plan on growing, obviously, based on what we talked about, all the projects in the pipeline. So, any time you're going to grow, just your general business expenses are going to go up. So, I'll just throw that also in there for you to think about. I guess we've also told people that we think this business is leveragable as we go forward. So, our whole focus, or one of our focuses, is to make sure SG&A percent of sales is going down as we go forward. So, we watch that as well, just again as a check, to make sure we're in line and spending out money wisely.

Great. Finally, I was wondering if you could provide us a little bit more color on this Knapheide distribution agreement. Has BAF been involved in the after market business before, and also, how do you see this expanding going forward?

Well BAF has been -- that's all they've ever been in is the after market business. This is following a strategy to work with these large ship-to companies, Knapheide. That's a big business, and I don't know what percentage, Peter, but an awful lot of the work body type trucks that end up in the market get shipped from a Ford factory through Knapheide to the customer. So, there are other companies like Knapheide, that are in different segments of the business. For instance, like limousine companies, and these other ship-throughs, we think it's very important strategy for us to have those relationships exclusive if we can, because they're the ones selling the vehicles to the end user.

Thank you. Our next question comes from Pavel Molchanov of Raymond James.

Just a couple housekeeping items. How many stations did you add in the course of 2010, and what's the trajectory for 2011?

45.

Well, we finished 45 projects under the engineering carpet. We lost a few stations. Some of those were upgrades, so we basically already had that in our station count. I would say, 25-ish, maybe net, maybe a little higher.

Again, going forward, we don't really, again, focus on stations as much as a lot of you guys want to. We look at it more from a project perspective and generating volume and doing good economic deals. But I would offer up that our CapEx budget, you'll see in our 10-K that we just filed for next year is $80 million. Obviously, the bulk of that is building new stations and doing various projects. I don't remember the exact station number in there. Again, we don't like to put that number out there, because a lot of times things slide, or if you don't get your permit on this date, or the utility doesn't show up and get the gas connected on time, pushes you out, so there's a lot of flux in there. But I think the important thing is looking at that pipeline, looking at our activity, everything seems to be headed in the right direction as more and more projects are coming on. As that happens, I think you are going to see our results improve and start to tick up.

Let me ask you also, a little more broader, to the best of your knowledge, how many NGVs do we have on the road today in the US?

120,000 or 150,000, somewhere in there.

I think that's right.

Okay, and any sense -- just based on your discussions within the industry, how that number is trending higher? So, are we adding 10,000 a year or 20,000 a year, or how is that working?

Well, last year you added a couple thousand trash trucks, and we did a few thousand. A thousand port trucks, and we did a few thousand at BAF. I guess one way to look at is it volume as well, and a lot of buses were put on the road. I know 2010 -- 2000 to 2010 you doubled the volume of natural gas, and that's been increasing at a more rapid rate. What's interesting is in the world, you're adding 4,000 natural gas vehicles a day, and eight stations a day. Now, obviously, United States is not moving that fast. But we've had our friends in the trucking business begin to move the numbers of the penetration rates up for class-A trucks. So, when you go from the United States, putting 150,000 to 160,000 new class-A trucks on the road, now you've seen what I've seen, the different reports talking about as maybe as many as a quarter of a million. And you use some of the adoption rates that you're beginning to see with transit and refuse, you apply those adoption rates, go back a year or two, and put those adoption rates on that class-A trucking class, you get a lot of vehicles.

So, I don't know that I would -- and, for instance, we know in 2011 and 2012, you are going to have -- certainly 2012, you are going to have a lot more product to choose from. That is really product that the trucking guys need. Today we have some product. We have good product that works well, but we -- our friends at Cummings West Port, they have the ISLG, which is a 9-liter engine, and they have the big HPVI, which is a 15-liter. But most trucking guys really would rather after 13-liter. So, Cummings is coming with a 11.9 and Navistar is coming with a 13, and Volvo is coming with a 13. That's really a 2012 story. I feel really good about where we're headed and the product that will be available.

But I wouldn't just say, well, last year we did 13,000, and that's the rate. I think you have to look at the adoption curve. A few years ago, you were doing just a handful of refuse trucks, and today about 30% or 30-some-odd percent of all the refuse trucks, I believe, being purchased in a year are natural gas. And that's from just a couple years ago when it was negligible. So, you put some sort of ramp up to get to that kind of adoption rate, and the reason that you have that adoption rate is because it's economic. The class-A guys, it's very economic because they use so much fuel. You get some pretty big numbers.

I appreciate the color on all that. Thanks, guys.

And Pavel, FYI, we just pulled out our K, there's the gas vehicle report, February 2011. Says there's 110,000 natural gas vehicles in the United States. So, it's in that magnitude. Might be a little less than what we originally said. If that's accurate. It is. (Laughter)

(Operator Instructions) Our next question comes from Vishal Shah from Barclays Capital.

This is Jake Greenblatt for Vishal. A couple of quick housekeeping questions. In terms of the IMW and BAF segments, can you give us any idea as to what we can think about for revenue and gross margin for 2011?

No, we don't give guidance.

Shame on you, Jake.

Nice try. IMW, we've said in the past on the call that they were clipping along at about $40 million of revenue, and we thought we could add 50% to that. So, that seems to still be hanging in there and on track. The other ones, again, we don't provide guidance. Sorry.

That's fine. Worth a shot. And then on -- I wanted to ask about the North Star acquisition. How can we think about that? Where is that going to get included in Q1 in 2011? Where, for our model's sake, can we think about revenue from there?

Interestingly, I think a lot of their business is going to be with us, because the concept there is they're going to help us roll out LNG stations to the various Pilot Flying J locations around the country as we build out our network, and that all gets eliminated in our financial statements. So, the way the accounting works, you are probably not going to see a ton of outside revenue, although they do have some maintenance contracts and certainly have some deals with outside parties besides us. So, if they build four or five stations next year, maybe you can do some math to outside people of -- assume they don't do the stations. They're just doing the equipment, you know roughly what a station and the equipment piece is. Maybe you can figure out some numbers.

But it's not a separate line item? It's going to be included mostly in the gallons and the construction?

Yes, it will just he be in our -- basically in our product sales line, and then the gallons for the O&M stuff will be in our gallon number.

Okay. That's helpful. One broader-based question. You guys got a lot of press over the UPS deal, and made The New York Times. And it obviously, helped both you and some of the other players in the industry kind of give a name to natural gas in the United States. How have you seen sales and overall customer interest since that deal happened? Do think that could be a real turning point for you as far as the regional trucking market goes?

Yes, I do, Jake. We can't talk about all the different things we're doing, because we're competition. But there has been a marked increase in interest in the -- what I will call the national shipper fleets. They have low carbon plans, and they have sustainability plans, and they are the ones paying -- if you just look at -- let's just use an example, maybe it's a Home Depot or some big company. They're the ones that pay the fuel bill, so they're very sensitive right now. So, you've got their attention. They saw this before, but they weren't necessarily convinced. And so I think having a well-known fleet like UPS to get the coverage it did, it's not lost on the fleet directors at these major national fleets around the country. So, it has helped, and it's important.

Great, thanks.

Thank you. At this time we're going to close the conference. I will turn the floor over to Mr. Littlefair for any closing comments.

Thank you, Operator. Let me close by saying that we see continued volume growth and acceleration of our business in 2011. We're pushing extremely hard to put all the pieces in place for aggressive growth in the future, and we look forward to reporting to you on our progress again in a few months. Thank you, and have a good day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.