Clean Energy Fuels Corp (CLNE) 2012 Q4 法說會逐字稿

Greetings, and welcome to the Clean Energy Fuels fourth 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 introduced your host, Tony Kritzer. Thank you, Mr. Kritzer, you may begin.

Thank you, Operator. Earlier this afternoon, Clean Energy released financial results for the fourth quarter and full year ending December 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, where the call is also being webcast. There will be a replay 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 10-K filed February 28, 2013. 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 EBIDTA will be reviewed on this call and excludes 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 directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and adjusted EBIDTA, 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 from the Company is President and Chief Executive Officer Andrew Littlefair and Chief Financial Officer Rick Wheeler. And with that, I'll turn the call over to Andrew.

Thank you, Tony. Good afternoon, everyone, and thank you for joining us. I am pleased to review our 2012 operating and financial results.

Today, we reported fourth quarter revenue of $99.1 million, which is up from $86.2 million in the fourth quarter of 2011. For the first full year -- for the full year 2012, revenue totaled $334 million, up from $292.7 million a year ago. Gallons delivered for the fourth quarter were 51.7 million, up 29% over 48 million gallons delivered in the same period a year ago. For the full year of 2012, we delivered 194.9 million gallons, which was up 25% from 155.6 million gallons delivered in 2011.

I want to mention the one-year extension of CNG and LNG tax credits that was included as part of the American Taxpayer Relief Act passed by Congress in the beginning of the year. These tax credits are extended through 2013 and are retroactive for all of 2012. However, because the bill was signed by the President January 2, we won't recognize the roughly $20.8 million in revenues in the fourth quarter of 2012. We will recognize that amount in the first quarter of 2013.

2012 was a monumental year for both Clean Energy and the natural gas for transportation industry, as a whole. The awareness of the environmental and economic benefits created by natural gas to fuel its vehicles has spread from our growing customer base, as President Obama who mentioned natural gas for transportation in his State of the Union address earlier this month. Even today's Wall Street Journal front-page article on the gas boom tells the story. Clean Energy has continued to form strategic partnerships with best-in-class companies who share our belief in the enormous economic opportunity of natural gas fueling for transportation.

Since our last earnings call in November, we announced a deal to partner with GE, wherein GE Energy Financial Services will provide up to $200 million in financing for two GE micro LNG plants which will be used to support our LNG Autoway stations around the country. GE Chairman and CEO Jeff Immelt said, quote, while GE is proud to be partnering with Clean Energy Fuels to develop natural gas infrastructure in the US. Clean Energy is an industry leader in pioneering a new way for America to fuel its vehicles and to further gain energy independence. With our GE partnership, we have other key relationships, with Pilot Flying J,Chesapeake, Waste Management, Republic Services, UPS, AT&T, FedEx, Verizon, Covanta, Hertz, Avis and many others. We have aligned ourselves with the leaders in the industry.

Before the start of the last year, we laid out plans for major initiatives to build America's Natural Gas Highway, which is a nationwide network of LNG fueling stations to serve America's heavy duty trucking market. We set very demanding station construction targets for the year, but I'm pleased to report that we achieved our goal of 70 LNG highway stations by the end of 2012, as well as completing construction of 62 core market stations that serve the refuse, transit and airport markets. For the year, we completed a total of 127 stations, compared to 68 stations completed in 2011, an 87% increase. I feel confident that we changed the discussion in the chicken or egg debate about which needs to come first, the stations or the trucks. The infrastructure excuse isn't that good anymore. Sure, there's more work to be done, but regional trucking can now go coast to coast and along regional corridors on natural gas.

The first commercial production of the 11.9-liter engines from Cummins Westport has begun, and the engines are being shipped, as we speak, to the original equipment manufacturers, Freightliner, Kenworth, Peterbilt and Volvo, and Navistar, later in the year. We expect CWI to ramp up production by August and expect this engine launch to be fully subscribed. We are working closely with more than two dozen contract carriers and working with over 100 national shippers on fueling, and will have specific fueling locations up and ready when their trucks are deployed on the road.

Here are a few examples of the deployments and vehicle orders either already fueling or planning on fueling within our station network. Earlier this week, we signed a new fueling contract with Lindy, one of the country's largest industrial gas companies. They've ordered 25 LNG trucks, each of which burns roughly 18,000 diesel gallons per year. And those trucks will be deployed in Texas and Southern California. UPS has expanded their LNG fleet of 70 with 12 more tractors that will fuel at Clean Energy's Phoenix station and plans to deploy 100-plus LNG tractors in Texas in 2013. FedEx Freight has been fueling LNG 11.9-liter Kenworth tractors out of our Dallas stations since October, running on close to 1,000 miles per day, and they have been pleased with the performance and fueling operation.

T&A Advantage, the largest bulk fuel carrier in the US, just deployed 25 LNG tractors at Phoenix, which fuel at Clean Energy's Angus station. Saddle Creek supplemented their natural gas fleet in Lakeland, Florida by deploying 60 additional CNG tractors, and now they have a fleet of over 100 trucks. Premier Transportation ordered 60 new CNG trucks to supplement their fleet in Atlanta, and the fleet fuels at Clean Energy's College Park CNG station, next to Atlanta's Hartsfield Airport. Heckman Watercourt will be running trucks from Shreveport, Louisiana to our Baytown, Texas LNG station and returning to Shreveport to service oil- and gas-fueled operations. And I am pleased to highlight that just yesterday YRC Freight, a subsidiary of YRC Worldwide, announced they will purchase LNG trucks to operate in their Southern California network.

Our Chief Marketing Officer, Jim Harter, presented at the Food Shippers of America Conference earlier this week in Phoenix, and 1,000 people were in the audience, 700 contract carriers and about 300 food producers. And they were asked for a show of hands who was not considering natural gas for their fleets, and not a single hand went up. And finally, here is a concrete example of what we are beginning to see. Procter & Gamble recently went out with an RFP to 40 of their haulers for about 10%, which is roughly $100 million of their annual fuel spend, just on natural gas. And those responses are now in. And to me, that is huge.

For 2013, our station build out will be gauged based on the anticipated truck deployment. We have the capability and the capital to construct an additional 80 or more LNG truck stop stations; but realistically, depending on where and when those trucks are deployed, that number could be closer to between 50 and 60 stations. And that, too, will be back-end loaded, as we know the adoption of the trucks will ramp up in the second half of the year. We are going to be prudent about our station construction CapEx to avoid building more stations than we need this year. And we still believe in the overall need for about 250 stations by the end of 2014 and that hasn't changed.

Importantly, in addition to stations we are building along the interstates, in 2013, the next phase of our station build out will also be focused on the distribution centers and intermodal facilities around metropolitan areas. These are hubs for major trucking activity, and these geographic trucking centers feed the interstate corridors. In order to serve the fuel demand of this trucking market over the next five years, we've been busy building up LNG supply across the country. In addition to the GE deal which I previously highlighted, we have contracts or supply agreements with utility and midstream companies across the US, representing roughly 350 million LNG gallons per year, and we'll add even more to that in 2013. This will give us more than enough running room and a strategic advantage over our competition.

Now let me turn to our core markets. In our refuse market, 455 new CNG refuse trucks were delivered to Clean Energy customers across the country in the fourth quarter and an additional 567 trucks were ordered. For the full year of 2012, over 2,000 new CNG trucks were delivered to Clean Energy's 101 refuse customers. In our airport taxi and shuttle market, we have now have 37 airport stations across the country and continue to see impressive fleet expansion throughout. Some noticeable highlights include SuperShuttle's announcement that they will be expanding their CNG fleet with 100 additional shuttles, which will fuel at our California stations, and the opening of our new CNG station at the Hertz Rent-a-Car's LAX property. We also opened a new station at Cleveland Hopkins international Airport with our partner, Packing Company of America. And I'm pleased to report that the city of Chicago has added 63 new CNG taxis and paratransit vehicles, growing their total to over 400 natural gas vehicles in service, an increase of nearly 40% since the beginning of 2012.

We have several big deals that have just been signed in the last few days. We were just asked to take over two stations for New York sanitation. We were awarded a new station for LA Metro. We extended our fuel agreement with Dallas Area Rapid Transit for the next two years, and signed a five-year extension with Orange County Transit for a new station, with an upgrade which services 170 buses.

Lastly, our CERF subsidiary achieved record production levels of 8.9 million gasoline gallon equivalents during 2012, and commenced sales from our second biomethane project, located in Michigan, in December. We have moved a substantial portion of the gas being produced from the Michigan facility, to date, to our boron LNG plant, where it was liquefied and delivered as a vehicle fuel. We believe this is the first time that a biomethane project has successfully injected biomethane into the common carrier pipeline, withdrawing the fuel from the pipeline at a fuel production facility, and generated rends under the federal renewable fuel standard, and low carbon fuel standard credits under California's low carbon fuel standard. In total, in 2012, we recorded $2.9 million in LCF revenue. This is a big accomplishment for our CERF subsidiary and lays the groundwork for a growing business of producing and selling a best of breed, low carbon alternative fuel through our growing network of CNG and LNG stations.

And 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 of my references for our results will be comparing the fourth quarter of 2012 to the fourth quarter 2011, and the year ended December 31, 2012 to the year ended December 31, 2011, unless otherwise noted.

Volumes rose to 51.7 million gallons during the quarter, up from 40 million gallons a year ago. For the year ended December 31, 2012, volumes increased to 194.9 million gallons, up from 155.6 million gallons. Our CNG, LNG and RNG totals for the fourth quarter were $35.2 million, $14 million, and $2.3 million, respectively. For the quarter, revenue increased to $99.1 million, up from $86.2 million. For the year ended December 31, 2012, revenue increased to $334 million, up from $292.7 million a year ago.

When comparing our numbers between periods, please note that the quarter and year ended December 31, 2012, do not include any volumetric excise tax credit or VTAC revenue, as the VTAC expired on December 31, 2011. VTAC revenue was $4.5 million and $17.9 million, respectively, in the fourth quarter and the year ended December 31, 2011. In January 2013, VTAC was extended through December 31, 2013 and made retroactive to January 1, 2012. Because the extension occurred in 2013, we will have to record our 2012 VTAC revenue in the first quarter of 2013, which we expect will be approximately $20.8 million. Also during 2012, we completed a large four-station CNG project for Dallas Area Rapid Transit that generated $40.3 million of revenue.

On a non-GAAP basis for the fourth quarter, we reported a loss of $0.23 per share. This compares with a non-GAAP loss of $0.21 per share in the fourth quarter of 2011. For the year ended December 31, 2012, we reported a non-GAAP loss of $0.75 per share, compared to a non-GAAP loss of $0.47 per share in 2011. Adjusted EBIDTA in the fourth quarter of 2012 was minus $5.7 million, compared to minus $3.5 million in 2011. For the year ended December 31, 2012, adjusted EBIDTA was minus $12.3 million, compared to $3.1 million in 2011. Again, please remember the fourth quarter and the year ended December 31, 2011, includes $4.5 million and $17.9 million, respectively, of VTAC revenue.

Adjusted EBIDTA and non-GAAP EPS are financial measures we developed to highlight our operating results, excluding certain large, non-cash or non-recurring charges or gains which are not core to our business. These items include the amounts we are incurring for the series one warrant valuation, our stock-based compensation charges, and foreign currency gains and losses related to our IMW purchase notes. In the fourth quarter of 2012, these items also included the settlement with the California Air Resources Board related to certain vehicles, our settlement with the IRS over certain VTAC claims, and the impairment of our investment in VPG. Adjusted EBIDTA and non-GAAP EPS are described in more detail in the press release we issued earlier today.

Our net loss on a GAAP basis for fourth quarter was $41.7 million, or $0.46 per share. This compares with a net loss for the fourth quarter of 2011 of $20.9 million, or $0.29 per share. For the year ended December 31, 2012, our loss on a GAAP basis was $101.3 million, or $1.16 per share. For 2011, our loss on a GAAP basis was $47.6 million, or $0.68 per share. Our SG&A charges are higher between periods, primarily as a result of our continued business growth and ramping up to support our construction of America's Natural Gas Highway, and the anticipated sales activity, once it starts fueling significant numbers of heavy-duty trucks. Our interest expense is also up between periods, due to the interest charges we are incurring on our $250 million of convertible notes we have issued over the last 1.5 years or so, to help fund our capital program, including America's Natural Gas Highway.

Our gross margin in the fourth quarter of 2012 was $21 million, which compares to $19.7 million in 2011. For the year ended December 31, 2012, our gross margin was $80.3 million, which compares to $76 million in 2011. Our margin per gallon this quarter with $0.31 per gallon, which is up $0.03 from the prior quarter. During 2013, we agreed to sell our ownership interest in our Peruvian joint venture to our JV partner for approximately $6.1 million. We expect the sale to close by March 31, 2013. During 2012, the Peruvian joint venture contributed approximately 9 million gallons to our gallon total. Once the sale is complete, we will no longer include any gallons associated with the Peruvian joint venture in our totals.

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

(Operator Instructions)

Steve Dyer, Craig-Hallum.

Rick, just to be clear on the VTAC, it's the $20 million and change in Q1, and that's strictly retroactive. And then every quarter from here on out is going to be sort of as pumped, right?

That's right. The $20.8 million is just a cumulative number for 2012 that we will recognize all in the first quarter of 2013. And then, going forward in 2013, it will be back to normal, that we'll record the amount as we sell the fuel.

Yes. Okay. Could you give an update on BAF and if you're seeing some diversification there outside of AT&T, and how you see that playing out this year?

Sure. We do see an expanded customer base, Steve. You know, we still love those big orders from those big companies, like AT&T and Verizon. We recently received a smaller order from AT&T of about 67 vans that came in a just a little bit ago. But we have been working with our 50 Ford dealers that we have trained around the country, and others, to expand our vehicle offerings. As you know, we have a full lineup of Ford offerings, running from the 150 all the way up to now, the 550 and the 650. So, it's a full portfolio of their fleet offerings. We have some pretty good relationships now with these different shuttle bus companies, Creative Coach and others around the country.

So, we are seeing an expanded customer base, but we are still up against trying to bring in some of those real big orders with some of the big national fleets. So, I give our guys a lot of credit for the expansion of the customers. But we could use -- we can always use more business in there. We're ready for it. We have good product, and we're working hard at it. But we could use more there.

Sure. Okay. Any way of thinking -- how should we think about the station construction ramp this year? I know it's hard to model, because it's sometimes lumpy and so forth. But how do you think about that?

Well, I was trying to get at -- I wouldn't say this is any huge or surprising departure. But, we'll continue -- I think the way you should think about it is our core business, we kind of lump our -- obviously, in our business, everything's core. But our core business of refuse, airport, transit, that's three markets that we haven't taken our eye off the ball, that's continuing to grow well. And we'll build another 50 or 60 of those stations. Some of those, as you know, are for our own accounts. Some of those are for our big customers, where we'll sell them equipment, do the design operations, sell them IMW equipment. And so that business goes on. And it's strong.

We'll add more airports. We're adding more. In fact, it's interesting. We have, already this year, responded to 20 RFPs. About 12 of those are transit properties. We've been awarded 5 already. And the others are outstanding, and we like our chances. And so that business will continue.

Now, when you look at the heavy-duty trucking market, and you look at that part of the business, we have the capability, as I said in my remarks, to build 80 stations or even more. But we want to be careful, here, that we don't get too far ahead of ourselves. Those engines were slightly delayed. We began the construction of these stations in the highway, anticipating a summer delivery, last summer. And you know, those engines were somewhat delayed. And, of course, we knew that. And we're glad we've done what we've done. But we went to be careful we don't get another 80 or 100 ahead. So, we're watching it very closely as we go.

I think you should figure that we'll build somewhere between 50 and 60, or more, if we can. It will be relatively back-end loaded in this year, because that's when we need it. It won't really affect your models, as you look at what you think we can do. We have plenty of capacity. We still believe that the market is going to require us and others to build, by the end of 2014, something on the order of 200 to 250 stations. And so we'll be ready with that. But we want to be a little careful this year and be prudent with our CapEx that we just don't get out way too far ahead of the truck deployment.

I like where we are now. I like that now we're on schedule. These trucks, as we were told by our friends at Cummins Westport, these trucks were to be delivered right now to the OEMs, the first batch, and that is happening, has happened. So we feel pretty good about it. We know that they're going to ramp up in August. And we know the back end of this year, depending on how these trucks work and depending on the experience, we can get into producing even more than what they've suggested so far. So, that's a long answer to your question, but I would think of us building somewhere around 50 or 60 core and another 50 or 60 of the highway stations.

That's very helpful. I appreciate the long answer.

Okay.

And then, just one more quick one and I'll hop back in the queue. Any update on the GE LNG liquefaction plants? Just maybe the timing of the CapEx and financing of those?

I'll let Rick speak to the specifics on it. Let me just tell you, we're making good headway with them. Our teams have worked very closely. We've had -- our technical folks have had several trips to Italy, working with the design. We've begun to focus on two properties, which I won't be any more specific with right now. But they're the ones that we've thought about in the Midwest and the Northeast area. You know, these things are long-lead items. We'll get a few -- I would say, in our budget this year -- and Rick, correct me if I'm wrong -- we'll get about $4 million as really our part of the permitting tab and a little bit of the design tab, before you see any other expenditures. So it's pretty light in 2013, and then it goes up from there.

That's right. We anticipate most of the more significant money will start in 2014. We have to, in essence, start drawing money at the end of '14. So, we'll probably put in our money, as long as we can, from our equity contribution perspective, to defer the interest charges. But it's probably going to be more of a '14, '15 type building time frame on the plant, once we determine where we want them and get them designed and all that good stuff, once we identify the actual locations.

Okay. Great. Thanks, guys.

Rob Brown, Lake Street Capital Markets.

You gave some good color on the fleets that are looking at this. But could you give us a sense of how the fleet maturation is happening? Are they waiting to see the engine and try a few vehicles? Or, how much has the rollout of the stations really got them interested and down the road toward contracting?

You're talking to a station guy, right? So here's the way I think. I think that really by building the highway, we've changed the dynamic. We've changed the dynamic between the contracted carriers and the shippers. So, it's not easy for a contracted carrier to wiggle out of the fact that there is no place to fuel. And I'll be the first to admit that the nationwide network's not finished. And there will be certain daily truck lanes that won't fit what we've got. But there's a lot of it that does, currently.

So what's happened, Rob, is literally hundreds of shippers are having meetings with their contracted carriers -- and we're involved in many of them -- where they're being asked to look very seriously at certain of the lanes that those shippers contract out with those carriers every day. It's happening from the Procter & Gamble story that I just told you, down. And so, as we've discussed, I think, before, you're not likely to get these guys to just haul right out and buy 100 or 200 trucks. They're going to test these. We know that this year is a testing year. But there are plenty of fleets that need to do that, and they get them in groups of 10 to 25, and more. And we're seeing that now. Some of them want to start with 6, and some of them want to start with 10. And so you're seeing that in dozens of fleets.

I believe I'm right in saying -- I was talking to Jim Harter earlier, that 10 of the largest contracted carriers are all testing vehicles right now. And so, yes, to answer your first part of your question, they want to see these new 12-liter engines. They want to see not only the 350-horsepower that's out right now, but that 400-horsepower, which is the one that comes out in August. And they're going to test them first before they get into serious orders. I think we should just realize that, that's what we expect.

But I like the way it's proceeding, and it's not unlike what we saw in the refuse industry. The only good news is that, in the refuse industry, we went through four different engines before we came up with the one, the 8.9-liter, the 9 -- what we call now the Cummins Westport 9-liter, which is a champion engine -- before we got to that one. And so you had a little bit of reluctance. You don't really have that with these. We haven't done that to the trucking community. And so I think that the acceptance is going to be pretty good.

Okay. Thank you.

Laurence Alexander, Jefferies and Company.

Two quick questions. One is just on utilization rates. If you could give a sense -- if you split your locations between the ones that are newly built and have no volume, and the ones that have a little bit more history, any sense for how utilization rates have evolved over the course of the quarter into the new year?

And then also, just in terms of partnerships. As more people talk about building facilities, are you seeing any evidence that your operating history is providing a competitive advantage in terms of winning new partners? Or how should we look at the competitive environment right now?

Well, go ahead.

I was going to speak to the utilization question. The good news is, our utilization in our core markets is going up. I don't know the exact number. But we feel good. It's going up nicely, because a lot of our taxi airport shuttle business guys have added several vehicles to our existing infrastructure, which has really helped make those stations more economic over the last year. The other thing that I would say, in the refuse sector, is a lot of times we'll build a station and the refuse company will churn x percent of their vehicles a year. So as each year goes by, we get another 10%, 15%, 20% of their vehicles that convert to natural gas. So that obviously helps the utilization on those stations. So it's something we're cognizant of and we're always trying to add additional vehicles to our existing infrastructure. We've been successful in several cases over the last year of doing it. And, obviously, utilization on the natural gas highway stations, hopefully, will go up quickly once we get these engines out and start deploying those.

You know, it's an excellent question. We actually, last year, hired about 12 more salesmen with just same-store sales growth, mostly focused around our airports. The refuse, as Rick indicates, is taking care of itself. They're adding trucks. And you're going from 20, to 30, to 40. And that's just the way they do their business. They add 10%, 15% a year. The airports, we're adding -- like for instance, on that Chicago example that I mentioned, we started out there with 150 cabs, and now we have 463 cabs. You like the way that, that's done.

We've seen other things -- for instance at LAX, where we have a really robust airport station, it got to the point where we needed to build another one. Are we fully utilized at our 200, 300 CNG stations? No. It kind of depends on what we've built. You'll recall that we've occasionally acquired some older utility systems that have to be upgraded and changed and new customers brought on. So, we continue to work on same-store sales growth. And obviously, we're just starting on the trucking side.

Now, your second part of your question, I just could not understand -- it was about competition, but I didn't get the question about our offerings as related to competition. Could you just get me that again? Because I just missed --

What I'm trying to get at is, to the extent that you have your staff and your firm is building up a history and an experience base, operating these units, bringing them on stream, et cetera, is that changing the way your negotiations evolve with potential new partners?

Well, you know, I like to think of us as the leader, right? So, yes, I think it does. Look, there's a lot of competition. There aren't many people in the business, though, that have the breadth and the vertical alignment that we do. For instance, at a recent bid, 67 people came out of the woodwork to suggest that they could build a station. Well, fully 50 of those had never built one before. Now, I don't doubt that they could build one, they might be able to. But when you look at our offerings, the fact that we've built more stations than anybody else in the United States, and we built more LNG stations, that we have an LNG fabrication company, a compressor company, that we haul LNG, that we have three plants. You add all of that together, and it gives a lot of our customers comfort.

And that's why I rattled through a bunch of those big players that we have, in the beginning of my remarks. That's the reason we're doing business with those big companies, because they understand that we have history and capability and size to be able to meet their national rollout needs. That's why we're doing business with Waste and we're building and operating all their stations today in a long-term operations agreement. Same with Republic, and we're building all their stations. I like to think you get credit for our capability and our history.

Thank you.

Caleb Dorfman, Simmons and Company.

Great. Thank you for taking my question. I guess, first off, how's your deal pipeline looking right now? And if we look at your deal pipeline over the past year, what's the general win rate? If it's very significantly between factual fueling deals and station construction deals, how do the win rates compare in those different sectors?

You know, I didn't go through that today, and I don't have those numbers right here, but it's not because I didn't want to. I was trying to keep it a little higher level. But, actually, if you look at those categories that I talk about -- qualification, validation, negotiation -- it's up 232% year over year. And the win rate -- the good news is, we win most of the stuff, eventually. We did almost two times as many deals in all those categories -- fuel deals, station deals -- two and a half times as many deals last year as the year before. So we do internally monitor it. It's going very well. Part of it's because you've got more trained salesmen on the ground and more things to offer. So, Caleb, I like the way that's working. Frankly, it's impressive. I watch it on a weekly basis.

Great. That's helpful. And I know we've talked about potential capital raises in the past. What are your thoughts on that now, looking at maybe building 50 to 60 stations this year instead of maybe at the high end of the 80 to 90 range? Is that going to help you push out the date that you'll need to raise capital? And what types of capital options are you looking at?

It's a good question. It's one we've been sensitive to, in terms of dilution. What we've said in the K, and I know you just got that thing, but we've said that our capital program is about $186 million for 2013. That would probably be a number that would take into account sort of the higher end of the station build. We have the capital on hand. We really have the CapEx we need for 2013, either on hand or with the next tranche of the Chesapeake money coming in.

So really, the way I look at it is 2013 is taken care of. And if you pare back a little bit on the station build, you really get quite a ways out into 2014 before you really need to do anything else. And you know, we get a little money in from Peru. We're doing things all the time to try to create room, without having to necessarily go out and raise equity.

That's right. I would just add, Caleb, that the $186 million includes 80 American Natural Gas Highway stations. So, the good news is, if we do put that total together this year, we'll have the money set aside for it. As Andrew mentioned, the nice thing is, between cash and investments and all that good stuff, coupled with the Chesapeake money that is due to come in this June, we'll have enough money to cover that, before you even look at gas generated from operations, or the VTAC revenues, et cetera.

Great. That's very helpful, Andrew and Rick.

Andrea James, Dougherty and Company.

Can you give us a sense of how many of the stations are in essence turned on? I remember last quarter you had built them, but they weren't all operating. So just the number of stations built versus the number stations operating?

You're really now focused on those American Natural Gas Highway stations.

That's exactly right.

We've got -- of those new builds, we've got 8 or 9. We've got 6 more getting ready to open, so that gets you to 14. And then we have 6 others that are part of that network in California. So you'll have about -- in the next 60 days, you'll have about 20 of those. And so our job, and I just mentioned -- I just heard this morning, we just got 25 more trucks, I didn't mention it, but 25 more trucks from a hauler that works exclusively for Owens Corning, and so we'll open one in South Carolina. So, over the course of the next six months, every couple months, we hope to open more of those stations.

And then the ones that are open, the capacity, at this point, just on a percentage basis, just trying to get a sense of where it could go, and they're at what level of capacity right now?

Remember -- and I don't know, Andrea, if we've talked about this, but this is kind of the way it's going to work. Now there's a couple nice anomalies to this. For instance, the station down here in Long Beach, we've had open a long time, that fuels hundreds of trucks a day. One of our stations that we brought on a little bit earlier in the process was the one in Las Vegas. That's already up to about 82 trucks. So if you think with me on that, that station's already on an annual run rate of a little over 1.6 million gallons. It has the capacity to do about 2.5 million to 4 million gallons. But I like that, because that's done very well in a little over a year's time.

Most of these stations we're opening up with, let's call it 20 to 25 trucks calling that station home, in a simple way to look at it. It's not that simple, but that's kind of the way I think you should think of it. And if you think with me that those 20 trucks do 20,000 gallons -- some of them do more -- 20,000 gallons a year. So you can see that, with about 0.5 million gallons, on an annual basis, you'll open the station, and that station can do 2.5 million gallons.

Got it.

We're not done at 20 trucks or 25 trucks. Our job, then, is to ramp that up. And that's what will happen over the course of this year and next year.

Thank you.

But you know, the nice thing is, and I know this sounds simplistic, but the reason I dwell on this is because we talk about tens of thousands and hundreds of thousands and millions of trucks. But when you really break it down to an individual station basis, you really need 100 trucks that call that station home on an annual basis, which gets you about 2 million gallons, that gets you to almost capacity. Then, you'll have the chance to spend another $0.5 million and add two more pumps and get you up to 5 million gallons. You like to think you start out with something that would give you probably a five-year payback, which is not acceptable, that's not what we're in this business to do, and you would grow it, over the course of the next year, up to 100 trucks. And on that rate, you're paying that station out in 18 months. So that's sort of what you're trying to do.

That is helpful. Thanks for that. Finally, just on the fuel sales side, I know you already talked about competition. But just the competitive landscape on the fuel sales side. People talk about Shell's endorsed the concept now. I just want to get your updated thoughts on that.

You know, I guess I like the fact that everybody is clamoring to get into the business. That makes me feel like we're not out here just spinning around by ourselves. But, we haven't seen much yet. We've heard some announcements. These are big players. They have lots of capability. Shell, you know, I think they've got their first station up in Canada. We haven't seen anything yet in the lower 48. Others have talked about doing it. I know that there are some stations being built in Wisconsin.

Hey, this is a big market. It's a 25-billion-gallon market. And there's plenty of room for a lot of players. We haven't seen much competition yet there; I'm sure we will, at some point. My guess is you'll see the competition kind of spread out a little bit, because there's a lot of room here.

Thank you so much.

Matthew Blair, Macquarie Group.

Good afternoon. Rick, regarding fourth-quarter SG&A, are the CARB and IRS settlements included in this number? And also, for 2013, how should we think about SG&A coming up here?

The CARB settlement, yes. The VTAC settlement, no. It's actually a reduction of revenue. There's some kind of one-timers in that fourth-quarter SG&A number, probably to the tune of about $3.5 million. If you pull that number out, that will give you, I think, more of a normalized number, heading into 2013.

One nice thing about SG&A that we've been talking about, and that we kind of watch around here is, we go into '13. I think, even pulling out all the extra kind of VTAC revenue to make it more apples to apples, SG&A as a percent of revenue should drop back down into that low 30% number that we have been trying to track to, as opposed to a mid-30% number. So I think that's good. We're seeing some leverage.

We've been, as you guys know, ramping up over the last year, year and a half, so we could build these stations for the highway and build the infrastructure and support system necessary so we can handle the increased sales activity, et cetera, et cetera. And I think we've been successful in doing that. And the nice thing is, now that we are here at this level that we're building 100, 120 stations a year and starting to get the increased business activity, we should be able to slow the growth of our SG&A year to year, if you will. SG&A has kind of shaken out the way we had envisioned and hoped. So, that's kind of good.

Okay. Sounds good. And then, I'm wondering if you guys can just share some thoughts on the long-term price relationship between LNG and CNG? If I check your website now, it looks like your average LNG price is about $0.55 a gallon higher than your average CNG price. What is that a function of? Will the new liquefaction capacity from the GE plants help reduce that gap? Or is that just a structural long-term gap?

Well, I think -- there's a couple things at work there. So depending on where you're selling LNG, it can be a little bit more expensive because of the transportation. So apples to apples, in the LA basin, to our high-volume customers, you don't necessarily see that spread. Even though a retail pump price may indicate that, that's probably not an indicative sales price. That would be one thing. But transportation does play a component.

Taxes plays an important component on LNG. So, today, domestic clean LNG as a motor fuel gets the privilege of paying $0.17 more than diesel fuel does. So that's a structural problem that we need to get fixed. And then, transportation plays another part.

And, frankly, the liquefaction and the hauling of LNG is a little bit more expensive than CNG. It just is. It's not $0.55 a gallon more expensive, but it's probably -- I think of it as $0.10 or $0.15 more. But kind of depending on where you are, the tax situation, that's real. I think that LNG will always be a little bit more expensive. But, remember, you're competing against diesel that's more expensive. So here, today, in the LA basin, gasoline is $4.12, I think, and diesel is $4.44. So, it's a little bit of apples to apples. But, LNG is a tad more expensive. I wouldn't say that I would have you go away from this call thinking it's $0.55 and that's it forever.

Great. Thanks. And then, Andrew, are you willing to give out a LNG trucks estimate, in terms of new sales for 2013?

I don't know that I'm the right guy to do that. But I've been gearing my vision off of what my friends that are selling the trucks have said, and that they have felt comfortable telling the market that they're going to sell -- now I'm now talking about the new engines, the new12-liters -- they have used, which I hope is a conservative number of 2,000. Now they've said that, depending on how the introduction goes and depending on how the acceptance goes, and you know these things always have a little bit of a speed wobbles in the beginning, that on the latter part of the year, that they could sell more than that, and that the order bank could go up, and that they have spots to produce more engines than that run rate in the fourth quarter at their Jamestown plant.

So we've done a lot of thinking around here that 1,700 to 2,000 engines, coupled with the 9-liter and coupled with the 15-liter, and what we see, we're not betting the roll that there's going to be 10,000 trucks sold this year. We don't think that's the case. We do like, and we are working hard to work on orders that, in the fourth quarter, that we're on a much higher run rate than we are, say, right now. And that's what I'm going to be watching for -- is how do these engines rollout, what's the acceptance rate, and really, in the August time frame, are we beginning to see orders build for the fourth quarter?

Great. Thanks.

Pavel Molchanov, Raymond James.

Just a question about margins. We've seen a couple quarterly down ticks in the product gross margin, down to 16%. You guys anticipating a bounce back, maybe into the mid-20% range that it has been historically, sometime this year?

Well, we don't give guidance. So I need to be a little careful here. But I would give you a little flavor. One thing to keep in mind is BAF has been challenged a little bit, just with their sales being relatively flat to dropping off, at the same time they basically expanded their production facility and incurred more overhead, if you will. So we need to get some more sales through there, to get those margins back in line. IMW, as you know, has had some issues over the last year or so that we've been working diligently on. The good news there is, with the new engineering and production and supply chain team that's come in, and we've been working with those guys to kind of get that ship righted. So that, I think, has been diminishing the margins a little bit artificially this year, that hopefully we'll see a turnaround next year, just from an efficiency and a cost savings, productivity type perspective. We also expanded the IMW production facilities, both in Canada and China, recently, in anticipation of increased sales. So they are also dealing with a little bit of an overhead drain on their margins.

So I think those are the two that we need to just keep our eye on and hopefully get some more sales through there to fix that. The fueling business, our fuel margins per gallon are heading in the right direction, are ticking up. We like that. That's a good story. The CERF margins, with the additional credits and stuff those guys are selling, that's a good story. So, there's a lot of good things going on in there as well. I think it's just those two from the subsidiary level that we need to get righted. And once that happens, hopefully, we'll pop back up.

We're seeing, the good news is, what we saw -- thank you, Rick -- we saw a little pressure on the sales of IMW. We've seen sales come around there. So that's good. Around the world, we've seen it tick up in Egypt and Mexico and some of these other places, China. So I like the way that's headed here in the first quarter.

A follow-up on -- you actually just alluded to it, the international opportunities. You mentioned Peru. I guess you guys are having some good traction there. Are you interested in really building on that? Latin America has a much better established CNG market than North America does. So is that something you guys will potentially get serious about?

Pavel, our Board's been fairly clear. Look, we're in the biggest sandbox in the world right here. We're the leader here and we have all of our stuff here, and we're way out ahead. We've played around in these other parts. IMW participates, we sell compressors in 26 countries around the world. We have 50% market share of the compressors and the O&M business in Colombia. And, believe it or not, in Bangladesh, we have most of it. We're building a whole bunch of stations right now in China. But that's probably the way for us to participate internationally. For us to go in and invest capital and enter into long-term fueling agreements with fleets and negotiate fuel agreements with governments who can set the price, sell us and then set the price, that's a tough game. It's probably not one that's well suited for us. I think we will participate with, perhaps, some LNG equipment sales in China, certainly our IMW business will. But I think we're better off, in our traditional fueling business, to stay here in North America.

Great. Appreciate it, guys.

Alex Potter, Piper Jaffrey.

I was wondering if you can give a little commentary on the outlook for station construction-related revenue here going forward. You don't have to give explicit guidance, just some of your expectations as we enter 2013.

Sure. One thing that I put it in my comments to kind of highlight that is, we had a $40-million project with DART during 2012 that was a big one-off type project. I'm not seeing any similar projects in 2013. So, if you pull that out, you get back to more of a normalized number that's kind of consistent with what we did in 2011. So, I would assume we're going to be somewhat back in that type of range this year, just looking at the activity in the refuse sector and some of the other sectors. So I guess I would offer that.

Okay. Very good. That's helpful. And then, I guess, just the same question, similar question, for IMW. It sounds like IMW could potentially trend the other direction in 2013.

We're hoping IMW starts ticking back up. And in addition to working with those guys up there to work on some of the production and process issues, we've also been working with them on getting the sales function and effort turned around, or going again. I'm not sure what the right word is. But they seem to be getting some good traction in several new countries, as well as the big stuff. It's always been looming and continues to loom in China. They should do pretty well here in America, again -- or North -- the US, with the refuse sector. So hopefully, that sales effort does turn around up there. They're also working on some industrial applications, which are big and kind of exciting, outside just the CNG fueling world. So we're doing what we can to help and support them, to try and get their sales headed back in the right direction.

Okay. Great. Thanks.

There are no further questions at this time. I'd now like to turn the conference over to management for closing comments.

Good. Thank you, Operator, and thank you all for listening in today. As you know, this year is the year of the heavy-duty rollout. What we have been waiting for has arrived. Our stations are built and the engines are coming. We are very focused and will add infrastructure in concert with the demand. So, thank you for your continued interest, and we look forward to visiting with you next time.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.