Clean Energy Fuels Corp (CLNE) 2012 Q1 法說會逐字稿

Greetings, and welcome to the Clean Energy Fuels first-quarter fiscal 2012 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tony Kritzer. Thank you, sir, you may begin.

Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ended March 31, 2012. If you did not receive the release, it is available on the investor relations section of the Company's website at www.cleanenergyfuels.com. This call is being webcast with accompanying slides available on the investor relations section of the Company's website, and the replay will be available on the website for 30 days.

Before we begin, we'd like to remind you that 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's 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 10Q filed 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 for 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 8K today.

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

Thank you, Tony, and good afternoon, everyone. Thank you for joining us. Today we reported first-quarter gallons of 43.7 million, up 23% from 35.5 million in the first quarter of 2011. We generated $73.6 million of revenue during the first quarter, up from $65.3 million a year ago. It's remarkable to look back since the first quarter of last year and realize how the awareness about natural gas has increased.

Much of this awareness stems from the high price of gasoline and diesel at the pump, coupled with the value proposition that natural gas can offer. This awareness resonates from our customers to investors to [opinionated] leaders, including the President, who has mentioned natural gas as one of the solutions for energy independence in the United States. We are building the infrastructure necessary to reduce our dependence on foreign oil by offering a cleaner, cheaper, abundant supply of domestic fuel. The abundance of inexpensive natural gas in the United States is triggering a manufacturing renaissance, to borrow the term from an April New York Times article on that topic, and we are an integral part of that process.

The economic disparity between natural gas and oil and the cost savings per gallon for fleet operators has attracted the attention of the commercial fleet industry. This transformation was on display recently at this year's Mid-America truck show in March, which is the world's largest annual trucking showcase. Every major OEM, including Navistar, Cummins, Freightliner, Kenworth, Peterbilt and Volvo all had natural gas offerings prominently featured in their exhibits at the show. And as we have said, we believe our announcement last year to build out America's natural gas highway has strategically co-locating the stations at Pilot Flying J's truck stops and others was a true catalyst for our trucking customers and the manufacturers to commit to natural gas for transportation. Now with the construction of our highway stations well underway, we are pleased to see that the shippers, the freight haulers, the engine makers and the truck OEMs are all joining our effort and helping the shift towards natural gas goods movement in America.

We are proud of our strategic fueling and marketing agreement with Navistar that we announced at the beginning of this quarter. Our sales team has been busy working with Navistar's dealers, providing training and participating with them on sales calls with potential fleet customers. Navistar is an important partner because they are a fully-integrated OEM, holding the number one or number two positions in key truck market segments, and they have committed to providing eight different natural gas truck models by the end of 2013. We also now offer what I call wet leased with Navistar dealers, which incorporates natural gas and offsets the incremental cost of the natural gas engine and still provides significant savings as compared to diesel.

Now, I would like to turn to America's natural gas highway. In mid-January, we laid out the plan for 150 new natural gas fueling stations and identified the first 98 locations in 33 states. Our goal is to have 70 of these stations open by the end of 2012. Because about 85% of trucking is regional in nature, we are strategically constructing some of these stations in corridor installments and we are on pace to have our first corridor, the Texas triangle, with stations in Dallas, San Antonio and Houston completed by the end of May.

In the third quarter of this year, we expect to have the Los Angeles, Dallas, Atlanta corridor, the Chicago to Dallas corridor and the Chicago to Atlanta corridors open. In the fourth quarter, we anticipate opening additional corridors in the midwest, southeast, and northeast regions of the country. By the end of 2012, our network of completed natural gas stations will allow the goods -- movement of goods across the country from coast to coast and border to border. We previously discussed, we anticipate that most of the fueling stations will be co-located at Pilot Flying J travel centers through our exclusive agreement with them, which will allow truckers to continue to use their normal fueling locations and provide them the same convenient amenities to which they are accustomed. We are also working with other regional fuel providers to fill in our network of stations.

To give you an idea of how our existing stations have been operating, our station in Las Vegas, which opened in January of this year, currently fuels 48 UPS trucks and 5 trucks from CR England. We expect these 53 trucks will consume over 1 million gallons per year, which is a powerful start. In our station in Seville, Ohio, Dillon Transportation is fueling 14 trucks as they haul for Owens Corning. Those trucks consume between 30,000 and 35,000 gallons per year each.

Let's now turn to our core markets. Although our America natural gas highway LNG stations are high-profile and an important focus, our core CNG markets have continued to perform well. In the refuse sector, we are currently working with 71 customers on 140 locations and have opened 15 new stations to date this year. Here are some of our refuse market highlight from the first quarter. We completed construction on our first refuse station in Las Vegas, which will soon fuel over 100 trucks for Republic Services. We just recently signed a contract with Waste Pro USA to build, operate and maintain a new CNG fueling station on our property in Fort Pierce, Florida, which is targeted to fuel the Company's new expected fleet of 158 CNG powered trash trucks. We also just completed two private stations for the city of Dallas where we will fuel 26 refuse trucks that will consume over 200,000 gallons per year at each site.

In Peoria, Illinois, we opened a public/private refuse station for Peoria Waste where we will provide operation and maintenance service for five years, and I believe we're on track to do two or three more with them. Virtually all of our refuse customers around the country continue to expand the number of CNG vehicles in their fleet, and we expect that the refuse industry will add over 3,000 natural gas trucks this year. Our refuse team just got back from WASTECON show last week in Vegas, and there were 29 natural gas refuse trucks on display, which was pretty impressive considering there were 10 on display last year and about 3 the year before that.

In our transit market, we completed a public/private station for Stark Area Rapid Transit Authority in Canton, Ohio. The private station will start out fueling 19 buses and the public station will also fuel AT&T vans, refuse trucks, school buses and other light-duty vehicles. In Los Angeles, we began fueling nearly 100 CNG commuter coach buses at our public infrastructure. These buses are owned by the Los Angeles Department of Transportation. We also have seen additional full-sized buses added to fleet -- transit fleets in Elk Grove and Santa Cruz in northern California, as well as in Akron, Ohio and Tulsa, Oklahoma.

(Inaudible) transit agencies around the country are seeing an increase in demand in their paratransit for dial-a-ride service. The new factory-built CNG MP1 vehicle addresses this market quite well, and we saw the first of those vehicles being placed in service in New York City, Long Island, Hartford, and Chicago over the past few months. In our taxi, airport, and shuttle markets, we are currently working in 35 major airports around the country, and we just opened a public CNG station at the airport in New Orleans in March. Our sales team has been busy working with our taxi and shuttle customers to expand their CNG fleets, and in the first quarter, additional shuttles have been ordered or deployed around airports in Connecticut, Seattle, Orange County, San Francisco, Las Vegas, Chicago and Dallas, where we currently operate 14 stations throughout the entire Dallas metroplex.

Now, let's talk for a second about BAF, our conversion business. Just this past April, we celebrated the opening of a new 91,000 square foot headquarters and operations facility in Dallas, Texas for BAF, and the completion of our 20,000th CNG vehicle conversions. In the first quarter, we finished up 600 vans for AT&T. Our sales and marketing team were a national trucking effort has been relentless in pursuing the aligning shippers and private fleets to deploy natural gas vehicles for their fleet. Shippers are strongly encouraging their for-hire carriers to move away from diesel in favor of natural gas because they understand the cheaper, cleaner, abundant, and domestic benefits it offers.

Here are some of our recent wins. In March, we signed a 10 year strategic partnership agreement with Saddle Creek Corporation, a leading logistics services provider, to build natural gas fueling stations at existing Saddle Creek distribution centers in support of their expanding natural gas powered truck fleet. In January, the first station opened at the company's headquarter in Lakeland, Florida, where it is designed to fuel up to 120 CNG trucks per day. This is significant because Saddle Creek trialed just one CNG truck last year, and after realizing the significant economic benefits natural gas could offer, they decided to expand their fleet. And some of their customers include the likes of Quaker Oats, Ocean Spray and Publix.

NFI, one of Lowe's contract carriers, is deploying nine-liter CNG trucks in the port of Long Beach, and we have provided them a five year national fuel contract of fuel at our American Natural Gas highway stations and anticipate them to deploy natural gas trucks elsewhere to support their growing customer base. Anheuser Busch agreed to deploy several CNG day cabs in Southern California. Anheuser is another fine example of a large fleet testing natural gas fueling and as they get comfortable with the operation and performance, we anticipate they will increase their orders with natural gas trucks in the future. We are working with them to encourage their contract carriers to use natural gas trucks when hauling from their breweries to the warehouse. (Inaudible) is committed to deploy 30 trucks between Dallas, Oakland and Los Angeles by year end. And finally, DART Transit committed to deploy a fleet of CNG tractors in Dallas to support Owens Corning. Their trucks will fuel at our stations.

Our America's Natural Gas Highway station construction carpet includes 100 active projects with 20 sites currently in construction, 34 sites in design and permitting and 46 sites under site investigation. We are on track to have 31 new sites completed by the end of the second quarter and have approximately 70 stations completed by the end of this year. Additionally, we have 21 other station projects in construction and 58 projects in design and permitting in our other core markets, so we are still on track to nearly double our construction volume from last year. Our project pipeline during the first quarter includes 545 deals in various stages of validation, qualification and negotiation, and this number, the 545, does not include America's Natural Gas Highway projects.

With respect to biomethane, we are realizing the return on our investment in upgrading and expanding our landfill gas plan in Nokomis Bluff where we set a record for production during the first quarter and completed the second phase of our expansion project. We have hit records per single day production in 2012 exceeding 40,000 gallons in a single day. Once our expansion is complete this summer, the capacity of the plant will be increased to an estimated 60,000 gallons a day. We also recently amended our gas fill agreement with Shell to increase the volume that we can sell them under this agreement, which we believe will ensure that this project is financially sound for many years to come.

Our Michigan project remains on track commissioning this summer and in March, we entered into a 10 year contract with a sale of more than 50% of the gas we will produce from that site. That sale agreement is pending certification by the California Energy Commission, which we are optimistic will take place this summer. In compliance with the Michigan site that we don't sell under the contract we signed in March will be marketed and sold directly from our vehicle fuel infrastructure as a fully sustainable low-carbon vehicle fuel.

With that, I'll 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 first quarter of 2012 to the first quarter of 2011, unless otherwise noted.

Volumes during the quarter rose to 43.7 million gallons, which is up 23% from 35.5 million gallons. For the quarter, biomethane was 2.1 million gallons, CNG was 29 million and LNG was 12.6 million gallons. For the quarter, our revenues were $73.6 million, up from $65.3 million. Adjusted EBITDA in the first quarter of 2012 was minus $2 million, which compares to $3.9 million in the first quarter of 2011.

As a reminder, VTAC revenue was zero in the first quarter of 2012 as the credit expired on December 31, 2011 and was $4.2 million in the first quarter of 2011. Adjusted EBITDA is a financial measure we developed to highlight our operating results, excluding certain large, noncash or nonrecurring charges that are not core to our business and is described in more detail in the press release we issued earlier today. Our gross margin this quarter was $17.7 million and was $18.3 million in the prior period, which includes an additional $4.2 million of VTAC revenue. We had a loss of $0.16 per share on a non-GAAP basis in the first quarter of 2012, which compares with a non-GAAP loss of $0.05 per share in the first quarter of last year.

Non-GAAP loss per share is described in more detail in the press release we issued earlier today. Our net loss on a GAAP basis for the first quarter was $31.9 million, or $0.37 per share. This compares to a net loss of $9.8 million, or $0.14 per share. The change between periods was impacted by the amounts we recorded for valuing our Series 1 warrants between periods.

We recorded a noncash charge of $13.5 million in the first quarter of 2012 and a noncash charge of only $3.3 million in the first quarter of 2011. Our SG&A expenses also increased between periods, primarily as a result of hiring more people as we ramp up to support our anticipated growth when phase one of America's Natural Gas Highway is complete. And our interest expense is also up between periods due to the interest charges we are incurring on the $200 million of convertible notes we issued in the back half of last year.

And with that, operator, please open the call to questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Rob Brown with Craig-Hallum. Please proceed with your question.

Good afternoon. Nice job on the quarter. On your corridors that you're starting to build out and your Natural Gas Highway stations, are you at a point where you're starting to see increased interest because those stations are getting out there? Or maybe just give us an update on how the flow-through from business is coming as the stations roll out.

Right, Rob, it's a good point. It's one of the reasons we did those or beginning to kind of roll out those corridor slides like you saw today because we need to let the market know when these stations are open and when these corridors are going to be open. The market is really wanting that. We were talking with Cummins Westport about that very subject on Friday. And so our salesmen now are out there with those corridor maps, and I think it's important to get that information out because it takes awhile to order these trucks and it takes a while to get these stations up and operating. So, it helps them plan, and we found it to be pretty compelling for the market.

Now, our job, as we've discussed before, is making sure that when these stations get opened that we have trucks fueling there, and that is job one for our national truck team, and they're on it. We also know that some of the product that we're waiting for won't be here until 2013, which is the 11.9 and some of the other product, and that's okay because we'll have these stations ready when they are. But we're working hard with our friends at Kenworth and Peterbilt, Freightliner and our friends at Westport -- Cummins Westport, to make sure that we can do the 9 liters and the 15 liters to bring product to the stations. And we're beginning to load them up. We just added some more trucks down to the new station that's on the Mexico border in California. That's what we're doing as and as these stations begin to open, you'll see more and more trucks fueling at them.

Okay, great. And then on the station construction revenue that you've been running, you have been running about $10 million to $15 million a quarter. Just wondering if that's kind of a sustainable run rate now or should that continue to be lumpy?

It's lumpy, Rob. It's all predicated on just when we happen to, A, have stations we're selling to the customers as opposed to our own account or B, when we physically get them done. Unfortunately, that's lumpy and hard to predict and makes you guys a challenging -- to figure out when those are all going to hit. I guess that's why you guys get top dollar.

And Rob, each of our -- some of our customers are different, right, in the refuse sector. We do a bunch of the -- we do construction for our -- some of our big customers. They're kind of -- the way their budget works, it seems like it's the middle of the year and then we end up finishing off a lot of them at the very end of the year for the beginning. So, that's -- it's just kind of hard to predict, but that seems to be the case with the refuse guys.

Okay, great, thank you.

Thank you. Our next question come from the line of Graham Mattison with Lazard Capital Markets.

Hi, good afternoon, everyone.

Hey, Graham.

Just quick question, I'm sorry if I missed it. Rick, did you give a gross margin per gallon in your comments?

I didn't, but the good news is it actually is up this quarter $0.26 a gallon, which we think is indicative of the fact of what we said before, that as we add on these new gallons and new projects, they're more in our commercial retail markets, which obviously is pulling that number up. I'm sorry, I think I gave you the wrong -- it was $0.28 this quarter and it was $0.26 last quarter.

In the fourth quarter.

Yes.

All right. And then on the SG&A number, were there any one-time items in this, or is this a good run rate to go forward with? I think on the last call, you talked about SG&A running around 30% of revenue for the time being.

Yes. We may be a little on top of that right now just because revenue numbers a little behind where we thought. Yes, the one thing that was unique in there is we reversed about $2.6 million on IMW contingent consideration. We anticipate we are going to have to pay, so that's helping us on a one-time basis. If you put that back in, you're probably going to get more close -- or closer to a more normalized number as we go forward.

All right, great. And then just the last question, going quickly through the 10-Q on the balance sheet, your outlook for spending for the rest of the year is about $190 million, which is just about at your cash balance. How should we think about this in terms of as you ramp up for next year? I know you have additional cash coming in from the Chesapeake bonds this summer.

Yes, keep in mind the short-term investment number is really cash. It's on a different line because it's not a cash and cash equivalent, it's actual investments, but that counts toward the pie. The other piece in there is restricted cash. A chunk of the Chesapeake money that came in originally with the $50 million is in the long-term restricted cash number, that counts towards construction. So, by the time you add all that up, we really have about $250 million of cash on hand to fund the 180. And then you're right, we have got another $50 million coming from Chesapeake in June and another $50 million coming in the following June as well.

All right.

Graham, the way I think of it and what I have been saying is that we've got this year more than covered, and you've got it covered because you'll have a similar capital program, if not more, next year. You're pretty well covered out through 2013 as well.

Got you. All right, that's very helpful. Thank you.

Thanks.

Thank you. Our next question come from the line of Eric Stine with Northland Capital Markets. Please proceed with your question.

Hey, Andrew and Rick.

Here.

Just the bookkeeping, just get it out of the way, could you just go through quick revenue for NorthStar, BAF, IMW, and also gross profit for each?

BAF revenue was $8.3 million, IMW was $13.5 million, NorthStar, $2.1 million. Margins on those, BAF was $2.8 million, IMW, $2.0 million and NorthStar, $0.4 million. One thing on NorthStar to keep in mind, we're kind of pulling them back from third-party sales that show up in external revenues and just using those guys to build our Natural Gas Highway station. I would anticipate their numbers are continue to kind of diminish from what they're showing up externally as obviously we're building these 150 stations. They're going to be pretty busy working on projects for us that don't show up in our external financials, FYI.

Okay, understood. Maybe just quick on BAF, did any volume slip for AT&T in the quarter? I think 600 was a little bit less than maybe you had indicated or thought last quarter. And then just wondering if there is visibility into the next order from AT&T.

I think about 60 or 70 of them slid a little bit. That's the difference between the 670 and 600. As far as the next order, we're working with them on that and talking to them, and I think Andrew said, you had lunch with their Chairman or somebody a month or so ago. So, we're working through all that and working with them and trying to obviously get that in-house as soon as we can, but.

We -- Eric, we -- obviously it's an important customer, and we have been off -- recently, we have been kind of off, the way we were operating with them a couple years ago where we're kind of quarter by quarter, we've got 500 at a time or whatever it was. We believe that there's a couple thousand more they will do this year. We think that's kind of back-loaded. Obviously, we have to compete for it with Chevrolet and with others. We like to think we're going to do well because our track record is good with them.

We also, interestingly, in AT&T, in meeting with their man in charge of their fleet, they look at their fuel savings all in their cost of operations. Even with the increased cost, they believe they're saving 30% on those vehicles as compared to a regular gasoline vehicle, so that's kind of impressive. So, the hope is that in the future, they're going to do more. They had an 8,000 commitment. We hope that they'll -- you might see them ramp that number up. So, we are working with them as closely as we can and think we have a pretty good relationship with them.

Okay. My next question, I guess is beyond AT&T, can you talk about some of the other fleets, maybe how the pipeline has grown, number of customers has grown?

Yes, I don't -- Eric, it has. I wish you could have been down there and seen our new facility because you do get a sense of the breadth of our customer base has grown. It's four dealers now ordering them on spec in New York City and in Los Angeles, and it's 35 units, large buses show up from El Paso. 50 new transit connects in for taxicabs. I don't have a number for you, but we can't just rely on the big AT&T order, and so we're having to grow the base. We think that we'll be closer to 4,000 units this year, which is good, but it comes from the expanded base of -- it's funny, it took us 20 years to get to 20,000 conversions -- to do 20,000 conversions, and this year, you will have 4,000 or 5,000, 4,000 more. So, the business continues to do well, but it takes a lot of work.

Okay. Understood. And maybe just one last one on IMW. If I heard you right, Rick, did you say $13.5 million in revenues?

Yes.

Okay. Just curious how we should think of the remainder of the year from that business and maybe some detail just about the first quarter. Thanks a lot.

Well, they had the huge fourth quarter last year. They did $22.6 million in the fourth quarter, so they were pushing hard to get a lot of orders out the door by the end of the year. Obviously because of that, it dropped off a little bit in the first quarter. IMW, they were out chasing a lot of big orders, China, Nigeria, other places all over the world, as well as working with us help supply the compressors we need for our trash business to the extent we're selling the units to outside customers where they show up on our financials. So, they're chasing a lot of good stuff and big stuff. It's just a matter of landing it and getting it in and timing and all that stuff and when and how fast that comes and when all that happens. Unfortunately, it's just a little hard to predict, so I don't really have a good answer and guess we don't do guidance anyway so I couldn't tell you even if I did. They're pushing hard, and they're chasing a lot of good things and hopefully, some of them will start landing.

Okay, thank you.

Thank you. Our next question come from the line of Matthew Blair with Macquarie. Please proceed with your question.

Hi, thanks for taking my questions here. First one, we saw very low natural gas prices in the first quarter, and I was hoping you could give us some sort of sensitivity between natural gas prices and the CNG and LNG prices that your customers pay. For example, if natural gas prices doubled from today's levels, how much of an effect would that have on the CNG and LNG prices charged to your customers? Thanks.

Right. Matthew, this is something I talk about a lot, and you probably are aware, but I think it's always good to go over. You get 8 gallons of gasoline equivalent, right, per MCF of gas. So, you literally divide 8 into -- today it was at $2.40, so that's your commodity per gallon. So, what's that, that's $0.30. The sensitivity is every dollar an MCF that the price of gas goes up -- so it goes from $2.40 to $3.40, figure it's another $0.12 per gallon. I guess the good news is that there's just an awful lot of room when you look at the price of that commodity per gallon, what our cost is at the nozzle tip and the price of gasoline.

You can really see a natural gas price go up significantly from where you are and if it tripled, you'd still have a couple dollars of room in between the cost of natural gas at the pump and gasoline. So, that hasn't always been the case, but today you're seeing it at about 40 to 1 on the spread. It's probably even higher than that if you look at the refined product. We don't need 40 to 1. It will -- it's come back. It was 51 to 1 a little bit ago. But there's just -- the economic advantage here is so big that it provides a lot of flexibility for us and on the pricing of fuel.

Okay, thanks. That's helpful. And then just thinking about this whole natural gas transportation economy and thinking about the choke points here, are you ever held up due to delays on the engine side of things, or do you find that your customers are generally okay on the engines but typically have to wait for the natural gas refueling and infrastructure? Any comments on this would be helpful. Thanks.

Sure. You would expect an infrastructure guy would say, well, it's the engines. But it takes both, obviously. As we think about the heavy-duty business in America and the great opportunity that we have, up until recently, we really didn't really have the engines. And I take you back to 2008 or so, working with our friends at Cummins Westport, we had to go out and buy the first 100 engines to convince Kenworth to put -- to hand build those and put them on the road. You didn't even -- other than a couple of test fleets, you really didn't have any trucks on the road. We've kind of come a long way from there to now having every OEM in the world announce a heavy-duty product.

Having said that, we don't have them all here yet. We don't have all the engines we need. The 11.9, that will be out in the beginning of 2013, I think is going to be critical. That's what the over-the-road Class 8 guys want. They want the 13 liters that are a little bit behind that. Yes, we are kind of waiting for engine product, and we have taken the bull by the horns to develop the skeleton network which, those stations will be there at about same time that those engine all arrive to market. We think the timing is pretty good. You wouldn't have want to have built these stations five years ago, waiting around for engines, but now all the things have come into play. So, it's a little of each. It's infrastructure, but it's also making sure you have the right engine product that the customer really wants. And that -- and the good news on that is it's coming to market.

Okay, great. Thanks a lot.

Thank you.

Thank you. Our next question comes from the line of Brian Gamble with Simmons & Company. Please proceed with your question.

Good afternoon, guys.

Hey, Brian.

Hey, Brian.

Andrew, I was hoping to actually go through the rest of that formula that you started with the fuel cost. I don't want to get into too much detail, but maybe you can give us some sense of the differential cost to you guys of LNG within the corridor. I mean, I'm assuming that a plant, or a station, rather, in Hopewell, Alabama, has a different ultimate cost to you than a gallon does in Dallas. Could you kind of walk through what the variances are there or just magnitude of delta?

Yes. I'm going to get -- Brian, I'm going to be a little careful here now because now we're talking about our pricing, and we have to be a little careful. But it's interesting. Liquefaction, obviously, liquefaction cost is the biggest component, right, to the LNG and really, when you get right down to it, an LNG plant like ours in California is not -- the liquefaction cost is not that dissimilar to [pale]. Sure, some are a little -- could be more, but when you really shake it out, it's -- the pricing of it is pretty consistent, and that can range from $0.25 to $0.35 or $0.40.

That's on an LNG gallon.

Gallon. That -- it's not a show-stopper, and here's really the probably, Brian, the most important thing. It's how far away the LNG is. So really, when you look at it, you want that LNG supply, and we desired a new Vice President, Senior VP of LNG supply, because this is very important to this whole business and will be important for all of us because we're targeting all of this LNG that's out there now. About -- you don't want to haul that LNG much over 250 miles, is kind of where you get down to it. Now, we have done it. For years we hauled it 800 miles each way, but you don't want to. So, if you can keep the transportation down to a couple hundred miles, you'll find the liquefaction costs with gas as sort of an index pass through, that's kind of where the business is.

You're saying that $0.25 to $0.35 includes the transport?

No.

No.

No, that's just the cost to liquefy the gas --

Could you give the same range, perhaps, for the transport? I know there's that kind of dotted line that you don't want to cross, but if you're 5 miles versus if you're 250 miles, could you give us a delta to that you're seeing on the transport side?

Yes, Andrew's right, it just depends on your proximity to your plant. It could be anywhere from $0.07 or $0.08 a gallon up to $0.10, $0.12, $0.14, $0.15 per gallon, just depending upon how close you are to your customer or to your station.

Perfect. And then Andrew, anything you want to say on the legislation side? I know there's just -- open forum if there's anything you want to tell us.

I could tell you all my secrets. Well, as you know, we de-emphasized it because we have such good economics, and you also know that we always thought that if it would pass, it would be good for the country and it would spur the growth of the business because it makes these one year paybacks now that we have even faster than that. And I think it would be good for all involved and certainly for the trucking and those that are adopting.

We haven't given up, as you would suspect we haven't. We're looking for different bills in the Senate. We're working with our key supporters in the Senate. We think we actually -- you remember, we have -- had 54 votes and frankly, we had 57, and then some backed off when they saw we weren't going to hit the 60. We know we have some support, and we're kind of looking for the right vehicle to maybe try one more time. But, that's sort of a self contained effort that we've got going on up there and our experts in Washington, and we're working with other industry leaders to push on that. I say stay tuned. But you could, Brian, you know what's going on in Washington as well as I do, not much. And they're getting ready to take summer vacation here pretty soon and Fourth of July recess, and then I think it gets very difficult until after the election.

Sometimes it's fortunate not to do anything and other times it's not, but I appreciate the color.

That's right.

Thanks, guys.

All right, thank you

Thank you. There are no further questions at this time. I would like to turn the floor back over to Management for closing comments.

Well to me, it's kind of boiled down to -- it's execution for 2012. And keeping a close relationship between watching --as we talked about on this call, between the engine manufacturers, the OEMs, the shipper customers to be ready as our stations come online in late 2012 or 2013. We believe everything is on track, and we like the fact that we've doubled up on our construction effort, even from last year, which was happy as days the year before. We believe the shift using natural gas for transportation fuels is an inflection point, so we're working hard to maximize our lead and prepare ourselves for significant volume expansion in 2013 and beyond. So, we thank you for your continued support, and I look forward to reporting to you next quarter on our progress. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines that time, and thank you for your participation.