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How I Created My Portfolio Over A Lifetime – Part I

Summary Introduction. Three ways to build a portfolio. What types of assets to include. Patience and income have been the keys to my long-term success. Conclusion. Introduction Obviously, there are many ways to construct a portfolio and allocate funds across different classes of assets. The method described here is how I do it. Having a set of principles and specific goals helps me to stay on the right path, and I hope my explanation will help readers to formulate a system of investing that works for them. The methods I use as described in this and articles to follow are meant to provide a flexible set of guidelines that can be modified to fit any investor’s needs. If you are just starting out on your lifetime investment adventure, it is important to establish a plan with reasonable, achievable goals and intermediate milestones. I focus on the next milestone to alleviate the frustration that can creep in upon setbacks (which are a natural part of investing). Each milestone is within reach in just a few years, so it is always achievable. Once a milestone is achieved, I just plod on toward the next one. When I was in my 20s and just out of college, I started out with a goal to save $25,000. Back then (in the 1970s), that was a lot of money. I attainted that goal within four years after graduating. The next goals was to double it to $50,000; then $100,000; and each milestone thereafter was to hit the next $100,000. The great thing about having a plan and sticking to it is that it gets easier to achieve each new milestone, especially after hitting $300,000, because you are not doing it all alone. Your money is working for you, too. Or, at least, it should be if you are doing it right. I have to admit here that I strayed from the path a couple of times and got behind. I still had a lot to learn. I was good at saving, but the investing part was not working as well as I had hoped. Initially, I was accepting more risk than I needed to in the hope that I could achieve those milestones faster. In contrast to the now-famous quote of Mr. Gecko from the movie “Wall Street,” greed is not good for most investors. It generally gets in the way of consistency. When you win, you win big; but when you lose, you lose big! If an investment loses 50 percent of its value, it require a 100 percent gain just to get back to even. So, it took me more than a decade to realize what I was doing wrong. Then I read an excerpt from a study that showed how 40 percent of the total return of the S&P 500 had come from dividends when measured over the very long term (as in a lifetime, or 30-50 years of saving and investing). Suddenly it dawned on me that by looking solely for appreciation, I might be missing as much as 40 percent of the potential that the stock market had to offer me. That was revolutionary and so began my investment approach evolution. One other thing happened during my formational period. A married couple with a new baby, friends of mine, came to me with a question: If I had a baby (which I did not at the time) and wanted to put away money for his/her college education, how would I invest it? This is way before 529 plans, so that was not an option. It was also during the early 1980s when interest rates were sky high (like 15 percent for 30-year Treasuries). They didn’t want to invest in stocks. So, I suggested that they invest in zero coupon treasury bonds, then referred to as CATS. They did. I didn’t. They are happy. I am sad. They were able to lock in a 12 percent yield. By the time their baby turned 18 years of age, they were able to sell the bonds they originally bought at a price of $25,000 for well over $200,000. Of course, they had to pay taxes on the interest each year as it accumulated, and then they paid capital gains on the amount of appreciation above the accumulated interest, but that was well worth it. If they had held those bonds for the full 30-year term they would have accumulated nearly $750,000. This sort of investment return is not achievable in today’s environment of artificially low interest rates. But the pendulum always swings and often to extremes, so be ready to jump on the opportunities that are available when they come. The point to all this “experience” chatter is to frame the answer to why I invest the way I do. I invest with a long-term time horizon, even now at age 66. I need my money to last for at least another 20 years for me and my wife. I would also like to leave a nice nest eggs for our two children. Thus, my horizon extends beyond my own lifetime. That is, by definition, long term. And that is how I invest: for the long term and for a rising stream of future income for me, my wife and our children long after we are gone. What is your time horizon? Think about that and make sure you define it well. You are not just investing for when you begin your retirement, but for at least another 20-30 years or more after. Make sure your goals align with those needs. Three ways to build a portfolio There are basically three ways to invest for the long term, in my opinion. This, of course, is predicated on a strategy of buy-and-hold for the long term. If you are trading in and out of stocks like I did before I learned my lessons, there are many other methods and systems to follow, none of which will be mentioned in this article. Sorry, but I am what I am. Buy on the dips Dollar cost averaging Buy only after a bear market Of the three listed above, I mostly use the latter. That is why I wrote a lot of articles until about two years ago when valuations were still cheap, and also why I have not been writing as much for the last two years, as valuations rose to historically dear levels. I am not predicting a crash, although a bear market does seem overdue at this point. We are in the middle of a correction, and I have no idea whether it will turn into a bear market or if the markets will recover to set new records. That is a discussion for another place. But I am collecting my dividends and interest, accumulating cash for the next great opportunity when it does finally come. Buying on the dips has worked wonderfully for investors since March 2009. It is a great way to systematically add quality stocks to a portfolio when valuations are below historical averages. Whenever the stock of a great company slips by more than ten percent (or whatever percent seems appropriate for that stock), buy some more. It is simple and it works during a bull market. But it does not work so well during a bear market. That should be obvious. If a stock falls ten percent and one buys, then it falls another ten percent and one buys, and then it falls some more and more, it can get nerve wracking and one may begin to question their own actions. The long-term investor will be fine over the very long term, but he/she may suffer losses in the short to intermediate term. The market will recover and, assuming the investor has bought high-quality stocks, so will the portfolio. The dividends will just keep on being paid, adding more cash to be invested to create more income. There is really nothing wrong with this method. Dollar cost averaging works in a similar fashion but with a twist. The investor continues to invest the same amount at specific intervals. When the stock is high, one receives fewer shares. When the stock is low, one receives more shares. It is a method that is simple because it takes most of the decision-making about when to invest out of the equation. It does not really optimize investment return, though. And it is also reliant on buying quality companies to hold for the very long term. Even the best companies go through difficult times, but the best of the best evolve with the times and find a way to right the ship. Selectivity is always a key to investing. Why do I generally buy only after a bear market? The simple answer is I like the lowest cost basis I can get. To expand on that answer a little: I prefer to not use trailing stops, so I buy at prices that only come along very infrequently. Why do I not use trailing stops, you ask? Because with high frequency traders [HFT] able to move the markets at the blink of an eye and with the creation of exchange traded funds, the chances of getting an order filled way below the stop prices is way too high. I have friends who got stopped out of long held positions at losses of 30 percent or more on the day of the flash crash on May 6, 2010, even though the trailing stops they used were set at no more than ten percent below the opening price that day. The Dow Industrials Index (DJIA) fell about 600 points in about five minutes and was down nearly 9 percent at its lowest point, only to spring back, recovering most of the loss for the day. There is more to this than HFTs at work here, but that is an explanation for another time or this article will become way too long. I will discuss these varying methods in greater detail in another article with examples included for comparison. What types of assets to include The simple answer is “everything.” The purpose is to achieve diversification. I will explain the purpose and my goals for diversification in another article. The basic rule is that by diversifying across different asset classes, an investor reduces the risk of having everything in a portfolio fall in value at the same time since some assets often move counter to one another. These are the types of assets that I own: Individual stocks ETFs Individual bonds (corporate, municipals, federal government issued or backed) Bond funds Real Estate rental properties Precious metals Should everyone own everything? Not necessarily. I will always maintain that the more one has, the more diversification one needs to hold onto one’s capital. There is also the very real need to be familiar with each class of assets in which one invests. Always stick with what you understand. That is probably the most basic rule of investing, and possibly the best advice I can give to someone starting out. The next piece of wisdom is to never stop learning. By expanding what you know, you will open up new opportunities. It may take years to achieve a level of comfort necessary to actually add a new class of assets to your investment portfolio, but the patience and time it takes to gain the knowledge are worth the wait. As you understand more about each asset, you will also understand that there are better times to invest in each one. Recognizing the best time to invest in a particular asset is important. It also requires patience, a theme you will read throughout many of my articles. Of course, it is possible to invest in just stocks and bonds and cover most of the bases. To get exposure to real estate, one can invest in real estate investment trusts (REITs). To gain exposure to precious metals, one could own gold or silver mining stocks, streamers or ETFs. To gain exposure to bonds, one can invest in bond funds or closed-end funds [CEFs]. There are both benefits and drawbacks to each method of gaining exposure. I intend to get into those issues in another article in this series as well. Promises, promises. I want to spend more time explaining how I allocate my portfolio and how I adjust my allocations across various asset classes in greater detail, but that will need to happen in the next article or two in this series. Again, I am trying to keep the length of each article down to a reasonable level. Patience and Income are the keys to long-term success This is my guiding principle. It may not be yours and that is fine, too. But as I realized that owning assets that pay me to hold them can provide me with more cash to invest, I was hooked. Once I realized that there are companies that increase dividends every year, I never looked back. This worked to perfection in the beginning. Then came the first major stock market correction of my investing life, 1987. It was fast. It was brutal. It unnerved me. That is when I learned about diversifying across asset classes. It also reminded me of how well my friends were doing with their CATS bonds so far. I realized that I needed to do something different if I wanted to protect that which I had worked so hard to accumulate. I have a great story to relay to you about real estate, but I think it will require an entire article to do it justice. I now have income streams coming in from multiple sources, and the income rises each year. I plan to keep that as my short-term goal each year going forward. It really helps to focus on the income side of the portfolio during volatile market gyrations. The value can go up or down in the short term, but as long as the income keeps rising, I can feel good about what I am doing. The longer I do it, the more confident I am in what and how I am doing it. Conclusion If you want to be a millionaire, you need to invest like one. Wealthy people do not need the income from investments so they do not need to invest unless there are bargains available. Think about that for a moment. There are bargains available most of the time in one asset class or another. The key is to identify which one offers the best long-term value at any given time. People who are not wealthy feel like they need to keep all of their cash invested all of the time. That is not how Warren Buffett does it. He likes to always have large amounts of cash available at all times. Have you ever wondered why? It is really simple. He likes having cash available for when a bargain appears. He does not invest just to keep his money working. He invests when he identifies a long-term value opportunity that only comes around infrequently. Buffett considers cash as an option on the future. If you have followed his quotes for very long, you will recognize this concept. What he means is that great investing opportunities will always present themselves at some time in the future if one is patient and persistent enough to wait for their appearance. There is so much more I want to cover, so I will try to submit at least two articles a week in the series for the next few weeks or until I feel most of what I want to write has been written. Until next time, do not rely on luck; rely on wisdom and hard work. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Clean Energy Fuels (CLNE) Andrew Littlefair on Q1 2015 Results – Earnings Call Transcript

Clean Energy Fuels Corp. (NASDAQ: CLNE ) Q1 2015 Earnings Conference Call May 11, 2015 4:30 PM ET Executives Tony Kritzer – Director-Investor Relations Andrew Littlefair – President, CEO & Director Bob Vreeland – Senior VP, CFO & Accounting Officer Analysts Eric Stine – Craig Hallum Capital Group Carter Driscoll – HC Winrate Rob Brown – Lake Street Capital Noah Kaye – Northland Capital Markets Andrea James – Dougherty & Company Pavel Molchanov – Raymond James & Associates, Inc Operator Greetings, and welcome to the Clean Energy Fuels First Quarter 2015 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, Director of Investor Relations. Thank you, Mr. Kritzer. You may now begin. Tony Kritzer Thank you, operator. Earlier this afternoon, Clean Energy released financial results for the first quarter ending March 31, 2015. 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, should, 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-Q, filed May 11, 2015. These forward-looking statements speak only as of the date of this release. 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 directly 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 from the company is President and Chief Executive Officer, Andrew Littlefair; and Chief Financial Officer, Bob Vreeland. With that, I will turn the call over to Andrew. Andrew Littlefair Thank you, Tony. Good afternoon, everyone. And thank you for joining us. I am pleased to review our first quarter 2015 operating results with you today. We reported 75.2 million gallons delivered this quarter, up 27% from the 59.3 millions gallons we delivered in the first quarter of 2014. Revenue was $85.8 million in the first quarter versus $95.3 million a year ago. Revenue decreased primarily due to three factors. We had a $9.1 million in construction project that were essentially complete at the end of the first quarter, but the revenue cannot be recognized. And most of this money is in the bank so this is just a timing matter. Lower natural gas commodity prices which in turn affected our revenue by $3.7 million. And finally IMW was a challenge as we told you would be on our last call due to a global equipment slowdown resulting from declining oil prices. As well as the strength of the US dollar which impacted international sales? Despite all of these our margins increased $0.02 to $0.28 per gallon and because of the increased volumes our fuel sale revenues increased by $8.4 million. Despite the decline in oil, we continue to see significant investments across the entire natural gas vehicles industry. Just last week, I attended the alternative Clean Transportation Expo in Dallas and there were several major announcements that will continue to develop and strengthen the NGV industry. Rush Enterprises, the largest truck dealership network in the country announced a new venture to manufacture, sell and stall and service new light weight compressed natural gas fuel systems for class VI through VIII trucks. Cummins Engine Company and Agility Fuel Systems announced strategic partnership that will include hardware and software tech natural gas engines and Agility Fuel tanks. Cummins Westfort announced that it will begin testing their spark ignited natural gas engine which is capable of producing near zero Nox emissions years ahead of the 2023 PA requirement. Ford motor company announced that in 2016 the F150, the best selling vehicle in the country will come with gas prepped engine. And Ford Landi Renzo announced they will be offering new F150, F250 and F350 natural gas trucks after market. Power Solutions International acquired power train integrators which will give PSI much greater reach in the GM on road engine and platform capabilities. This will open new opportunities for them through freight line or GM and other OEM offerings. And last month Peterbilt introduced two new models LNG powered truck configurations to their line up of natural gas vehicles. One silver lining of this lower oil prices is that the industry is responded by working to reduce incremental cost in natural gas trucks. Partly due to our tank programs with Agility and Chart. In certain truck configurations we’ve seen tank and engine prices come down more than 25%. This is great news as it helping to drive adoption. Turning for the market to the specifics of Clean Energy, we made progress across all of our market segments in the first quarter. In trucking, Raven Transport is deploying 115 additional heavy duty LNG trucks. This is a great example of adoption from long haul multi state trucking customer. They will now be fueling a 184 LNG trucks at 14 Clean Energy stations in eight states throughout the South East. We signed an agreement with Potelco in Washington to fuel 75 heavy duty LNG trucks. We opened two additional truck friendly stations in Arizona and Kansas City to support 58 CNG trucks for seaboard transport. We signed an agreement with Dean Food to build a private CNG fueling station to fuel 64 trucks at their Oak Farms Dairy plant in Houston, Texas. We have also expanded our fueling agreement with Dillon Transport who currently operates over 200 CNG trucks and we expect their volume with us to triple year-over-year. And in our rough use market we are building a third CNG station for Burrtec Waste in California. We completed a new station in Tampa for Progressive Waste for their 75 new trash trucks and we are building a fourth CNG station for Waste Pro in Sanford, Florida to support their 90 new trash trucks. Led by our customers’ waste management and republic services, we believe the refuse industry is picking up the pace over previous year. We should build over 35 stations projects for our customers this year, a record number. And we expect a record number of trucks to be deployed. Currently, we feel about 8,900 trucks for our refuse customers each day. In a transit market, Dallas area rapid transit added 63 new CNG buses. They now operate a natural gas fleet of 568 buses in 232 para transit vehicles that fuel at the four stations we built for them. We built a private station for Torrance, California’s municipal fleet of 35 trash trucks and 29 transit buses. In our fleet services market we opened Orlando airport station which can accommodate vehicles ranging from passenger cars to buses to heavy duty trucks. Year-to-date we’ve completed 16 station projects for ourselves and our customers in our various market segments. Let me now spend a moment on IMW. As we mentioned on the last call we anticipated that they would be challenge in the first quarter. Some of that is due to the global decline in oil which soften their sales and some of that is due to the strength in US dollar. However, we have right sized the business and made significant product enhancements. We standardized our compressor design which will decrease our time to ship and make our manufacturing more efficient. So IMW was somewhat of a drag in Q1, it is getting better in Q2. There are still global demands and we recently receive orders from China, Vietnam, Eastern Europe, Canada and Mexico. IMW remains strategically important for us as we account for roughly 20% of their production for our own station builds. Turning now to our renewable fuels division. Last week UPS signed an agreement to purchase our Redeem branded renewable natural gas fuel at their stations in Sacramento, Fresno and Los Angeles. We estimate that these three stations will provide approximately 1.5 million gallons of renewable fuel annually to roughly 400 CNG vehicles that UPS has deployed in California. This was a significant step in the expansion of our Redeem business. As you know, we’ve been supplying redeemed all of our public stations in California since launching it about a year and half ago. Over the last six months, municipalities, universities and now UPS, the largest logistics company in the country have signed long-term deals to guarantee they will receive renewable natural gas that is rated 90% clean than diesel. This deal sends a strong message to the transportation industry. UPS continue to be leader in the deployment of natural gas vehicles with their recent announcements of increased orders of both LNG and CNG of over 800 tractors and 600 delivery vans. In fact, UPS is on record saying they haven’t purchased a diesel truck in the last two years. We sold 8.9 million gallons of Redeem in the quarter compared to 2.8 million gallons during the first quarter of last year. Redeem is nice a contributor to our margin and revenue and we continue to be very bullish on the growing an environmentally relevant business. Our new virtual CNG pipeline business NG Advantage has made solid progress. They are recently awarded a contract to provide compressed natural gas to international papers by Ticonderoga New York paper mill which we expect to add at least 5 million gallons this year. This is a significant opportunity for NG Advantage and we look to expand this business as new opportunities emerge to lower our customers’ fuel cost while meeting with their environmental goals. Our two stations that support NG Advantage accounted for over 4.7 million gallons combined in the first quarter. Regarding our CapEx plans for the year we are still on track to spend $38 million for Clean Energy and $21 million related to NG Advantage growth opportunities. Remember, this is down from $87 million last year. At the end of the first quarter, we had $220 million of cash and investments on the balance sheet. Overall, our core business is doing very well with growing volumes and expanding margins in relatively difficult environment. Although there was pressure on EBITDA this quarter, I want to reiterate that we still expect to be adjusted EBITDA positive for the full year. And with that I’ll turn the call over to Bob. Bob Vreeland Thank you, Andrew. And good afternoon, everyone. It is my pleasure to go over our financial results for the first quarter ended March 31, 2015. I’ll address some highlights as well as some of the challenges. The financial highlights of the first quarter fall under four areas. Volumes and the associated increased revenue, margin for gasoline gallon equivalent, SG&A spending and cash flow. The growth in volume of 27% over the first quarter of 2014 came from all of our sectors. The most notable growth coming from the following. The trucking increased 35%, refuse increased 24%, transit increased 14% and our industrial sector more than doubled. From a product standpoint, our fuel gallons increased 29% and our gallons associated with operating and maintenance services increased 28% compared to the first quarter of 2014. Revenues related to gallons delivered increased 15% or $8.4 million when comparing the first quarter of 2015 to the first quarter of 2014. Our margin per gasoline gallon equivalent was $0.28 compared to $0.27 in the first quarter of 2014 and compared to $0.26 in the fourth quarter of 2014. This gain in margin is attributed to product mix essentially more fuel gallons, declines in natural gas cost and additional RIN credits. Our SG&A spending remain under control at approximately $30 million for the quarter, an improvement of nearly 10% over year ago and flat with our most recent quarter. On cash flow, we collected all of our 2014 volumetric excise tax credit in March which contributed to our positive cash flow from operations of $20.9 million for the first quarter of 2015. As Andrew mentioned upward our cash and investments at $220 million at the end of March 2015. Now the challenges we face in a quarter were the anticipated lower revenue volume from IMW, the timing of revenue recognition on station sales and to a lesser degree the impact on revenue of price declines from lower commodity costs. IMW revenues were impacted by a slowdown in orders on the international front and the government sectors due to low oil prices and the strength of US dollar. Also when comparing IMW revenue between the first quarters of 2015 and 2014, IMW’s first quarter of 2014 was exceptionally strong due a large custom project in process at that time and other orders that carried over from 2013 which we knew would not be repeated in the first quarter of 2015. On our station sales we had three large station projects that did not meet our revenue recognition accounting requirements and thus will be recognized in the second possibly third quarter depending on certain external factors outside our control. This was about $9.1million in station revenue that was deferred outside the first quarter and which Andrew indicated as well, most of that’s been collected. On the price front, we will always have certain fluctuations in pricing. This first quarter saw some rather meaningful price declines, driven by the lower gas commodity cost. That impacted our top line revenue by $3.7 million when compared to 2014, although most of this did not drop down into our margin and due to the lower cost. Our adjusted EBITDA for the first quarter of 2015was negative $5.6 million compared to negative $6.8 million in the same period in 2014 despite having $9.5 million less in revenue in the first quarter of 2015 versus 2014. We were positively impacted by our increased volumes and steady margin per gallon between the periods and negatively impacted by the lower station sales in IMW revenue. We expect quarterly adjusted EBITDA to improve as we continue to leverage our station and cost infrastructure and grow volumes. We still expect to be positive adjusted EBITDA for 2015. From a balance sheet perspective the most notable change from December was the collection of volumetric excise tax credit. We also have done some financing of capital expenditures principally CNG trailers supporting our industrial sector namely NG Advantage. Now we generally get a question on our convertible notes coming due at the end of August, 2016 in the amount of $145 million. As a reminder, these notes are payable in cash or common stock at our election. We continue to actively address these notes and we are evaluating a variety of alternatives. In addition to the equity aspect available, we also have over $500 million in encumbered long-term asset along with our own internally generated cash as we look forward towards positive EBITDA and a possibility of further VETC or asset sales. The key takeaway here is we are actively addressing this matter and we have a variety of choices. Our goal is to satisfy the notes in an effective manner while maintaining adequate cash and operational flexibility beyond August 2016. And with that operator, we will open the call to questions. Question-and-Answer Session Operator [Operator Instructions] Our first question comes from the line of Eric Stine with Craig Hallum. Please proceed with your question. Eric Stine Hi, everyone. Wondering if you can just talk about what are you seeing from shippers in the market? What role that played in the Raven deal and what role that’s playing in some of the other contracts out there? Andrew Littlefair Yes, Eric. That continues. Just to — for our friends who maybe aren’t quite as familiar recall that shippers, we use that term to the companies like Procter and Gamble or MillerCoors, these are large consumer companies that may not have their own trucking fleet and they actually go out and hire contracting fleet — contacted carriers for them. And as you know we talked to dozens if not more than hundred of these companies trying to make sure they understand the sustainability games by natural gas and also that the cost of the fuel. And we do it now in a constructive manner with our trucker friend because obviously the shippers and the truckers are very close. And so we continue to see the shippers, Eric, move forward. Procter and Gamble as you know I think has 20% mandate in place for its carriers. Raven fit in their — they do some Procter and Gamble work as I think they also do some for MillerCoors. We have seen MillerCoors would be aggressive wanting to have hauling at a lot of their different breweries move this direction. Kroger has their own fleet but they are also been very aggressive. So we continue to see these shippers Colgate Palmolive, Home Depot and others. So I think it is going to be a bigger and bigger move because they are savings on the fuel and there is a great sustainability gains to be have. They wanted to do in a constructive manner with their hauler. They have to have good relations with their trucking company but on the other hand they pay for the fuel. So we continue to see the shippers move in this direction and work with their truckers. Eric Stine Got it, okay. And then on that Raven deal, I know that enabled to you — that was your anchor fleet to open another three to four stations. Just curios how that deal has — having those stations in place has changed conversations in that area of the country and just what you see going forward? Andrew Littlefair Yes. I mean I think to the extent that some people thought we obviously build lot of stations and didn’t have — we haven’t had them open yet because of the slower deployment of trucks and the kind of year delay in those trucks. But you know what the Raven is a perfect example. If we didn’t have those stations built right now they wouldn’t have made that deal, they wouldn’t have been able to make that deal and have those routes to satisfy the Procter and Gamble business. And so it totally changes the discussion and it means that right now as Raven begins to take those delivery of those trucks we are able to open these stations at our previously where we spent the capital and we are ready to open them in a matter weeks not in a matter of year if you have to build it from scratch. One other thing I think is important the Raven deal and of course these are LNG trucks. We are not– we have seen a lot of urban kind of regional haulers use compressed natural gas and we feel a lot of those, this is really one of the biggest deployments of real long haul trucks. These are irregular routes going over night, hitting many different cities and our network is able to accommodate that. So LNG is a very good fuel for that and I think that’s why Raven went with 150 LNG tractors. Eric Stine Got it. Maybe to sticking with LNG stations, you have now got a number of cold LNG tank solutions in the market for Spark ignited. Is that — are there actual instances where that enables you to open a station on 20 trucks versus kind of the historical levels more like 30 plus? Andrew Littlefair Yes. We in fact we have kind of altered our position where — this is for LNG of course, where we can open those station out with 20 trucks. And in fact we have done it with less, we’ve done it with 15. So which is nice because that is — that’s kind of in the wheelhouse in terms of the number of trucks that these guys are beginning to take and it allows to open stations. We’ve opened — in the first quarter we opened another four plus one mobile five, we opened actually a station Friday which adds to that number six and plus three more mobile fuelers. So we are able open them now for 20 trucks and as I said earlier we can open them in a matter of weeks when we are ready to go. Operator Thank you. Our next question comes from the line of Carter Driscoll with HC Winrate [ph] Please proceed with your question. Carter Driscoll Hi, guys. How are you? First question just given the depressed prices for several quarters, I am sure maybe hopefully you are thinking the competitive environments maybe waned a little bit and obviously purchasing stations in the past, has your thinking changed there might be some strategic assets or stations in particular out there that you might be able to cherry pick or maybe even a group of stations and how that does or doesn’t fit in with your current CapEx plans and then obviously with the bullet payment you have due next August. Andrew Littlefair Well, right. And I think that the downturn in oil prices has probably put some strain on players that have few stations and then they might be a few truck friendly stations in a given region. We have a history of kind of take advantage of those opportunities when we see them. As you know we bought stations from SoCalGas Public Service Colorado, Lone Star Gas and Brooklyn Union Gas. So we made acquisition from time to time. I think you will see a couple of packages come up. I can’t say much more about that right now. We obviously have to weigh whether or not we think they are appropriately loaded or if they help our network, we have 257 stations that we own, I guess we actually co-own about 10 of those and then we operate another 301 so when you look at network, I think our next largest competitor maybe has 70 or 80. So if there will be occasions where there maybe an order to that will fit in nicely and if couple of these bigger packages comes up, we will look at them. You are right we have to weigh our cash and or stock prices and our ability to take that on. And we have to make sure that’s it is going to fit our network. Some of these smaller players and smaller stations, they might be situated at a convenient store; it doesn’t really fit our model. So we wanted to be careful on what we look at. Carter Driscoll Right. Now that makes lot sense. And then you have seen lot of — well you have seen some activity in terms of moving more towards the leasing model and trying to get maybe discount on the fuel or have it amortized within that leasing price. Can you update us on your efforts in that regard with your partnership? And then I have one more follow up if I may. Andrew Littlefair Okay. Well, you know we’ve been doing that for a long time. I mean you probably – I mean we actually did some of deals like that in fact Boone talked about it, did some with school districts 15 years ago. So this is something that we looked at for a long time. You know we have partnership, relationship with GE to do that. Of course that arm is for sale right now. But it’s business as usual. Our sales team and theirs are canvassing about 150 different fleets. We’ve had 46 different proposals from customers through GE lease with our field rep into that. We’ve actually made handful so better that I think about 10 of those deals have actually consummated. I think in the leasing scenario right now as you are looking at, at least what we saw little bit of GE with that with the down deep into the fuel price. It put some pressure on gas or diesel product to really scratch their head more and if they wanted to now go and leasing that for gas truck. But I think it is — one of our competitors recently announced deal like this. It is good way to go. There is enough fuel savings in there where you are really able to put somebody into a natural gas truck at a similar same price as a diesel truck where you offsetting the incremental and you are able to make it up with the fuel price over time with the fuel contract. So it makes a lot of sense and it is part of our package, our 80 sales men, they all have this is one of their tools in their bag and so yes we will see more of it. Carter Driscoll Okay. And then maybe if you could just give us an update on — well, maybe not an update but maybe your qualification of what you’ve learned with the NG Advantage structure right now? What’s been maybe ahead of schedule? What’s been maybe behind schedule? Or in terms of signing up customers, has that been faster or slower, maybe even kind of the average size of what you’ve done so far? I know it’s been relatively few in number so far but if you could just qualify how you’re performing in that –? Andrew Littlefair Yes. We are very pleased with NG Advantage. And even in this tighter oil environment versus fuel because we are competing with fuel oil mostly in that but we are still able NG Advantage is still able to offer 25% to 30% saving. So the international paper, this is different than the trucking business where there is thousands of fleets and millions of trucks all over the place. There is more defined geographic location and also there are only 10 or 15 international paper plants. So now they are huge consumers of fuel and we are very proud of that international paper deal because I mean in that one deal is 5 million gallons and so we are really very focus NG events of those type of customers. They are in the North East, they are in the Middle Atlantic and we are pleased the way that’s going. We’ve signed up several more customers since we acquired that business, fact you know it is a high class problem. We are getting ready to be out of capacity those two stations that we have one in New Hampshire, one in Vermont. We are going to add capacity to it. So we have high hopes for the way that business continues to develop. Carter Driscoll Okay. And maybe just squeeze in one more and I’ll ask kind of the ubiquitous question. From a trucking perspective, have you seen any noticeable shift between CNG and LNG? Is it really still more of a return to base focus for CNG and longer haul, more focused on LNG — do you still have that expertise — Andrew Littlefair Well, I still think that’s the case. I mean I have been clear, we like the way we are positioned because we do both. And I think right now we are at 70% LNG, I mean 70% CNG and 30% LNG. Obviously we had some big wins recently on a couple of LNG fleet. I do think that when you are in an urban environment, return to base, CNG is probably the right fuel. And when you are longer haul, over the road, irregular route, LNG is going to make a lot of sense for fleet. And so we are well positioned to do both. Lot of our truck friendly stations, about half of them now the ones that we both have CNG as well as LNG. So it is whatever the customer needs. But I think you are right, over time longer haul will probably shift little bit towards LNG and I think we turn to base in urban environment, it is pretty tough to compete with the CNG. I think that would be the preferred fuel. Operator Thank you. Our next question comes from the line of Rob Brown with Lake Street Capital. Please proceed with your question. Rob Brown Good afternoon. On your Redeem business, what’s sort of your gallon capacity in that business? Can you continue to grow that sort of without limit? Or is there a limit there? Andrew Littlefair Well, if you ever heard our man who runs that business, Harrison Clay, he will tell you to, he will give you very large numbers. I mean if you look at the country and you look at digesters and agriculture and land fill, you can get to see very large numbers. I mean many tens of billions of gallon. So I think in fact I was talking with Boon about this about a week ago, he wondered how big could that business really be. It is pretty large. Now there will be certain areas where it will make more sense and maybe too far away from the transportation market or too far away from the grid to be able to put that fuel in. I think it can be very large. We expect to grow our Redeem business more than double at this year. And we are now bringing more of third party gas we ever before with certain deals that we are doing so we are bringing a lots of fuel. The advantage that we have over many others in this business is that we have the stations to be able to get this in the transportation fuel. So that’s give us a leg up. So we have some fairly large third party producers that are bringing this fuel and they want to get it to us to be able to get into our transportation network. That’s where you get the full value of this is to be able to do get on the land fill or get out of digester but get into the vehicle tank. We are uniquely positioned for that. So we are beginning to see more and more traction where for instance LAMTA is going out to look for Redeem at least 50 or 60 million gallons a year. So you are beginning to see fleets recognize the importance of being able to use really the cleanest commercial fuel available like in the country, in the world for that matter. So we like it. Our customers as evidenced by UPS and others like it and understand it. When they look at wanting to be sustainable, I know this sounds touchy feely when you start talking about sustainability but they are serious about it, these big companies. So it is one of the most impactful things they can do to hit their sustainability goals. And so, yes, it adds revenue for us and it adds nice margin for us. And our customers like it. Rob Brown Okay, great, thank you. And then you mentioned the Agility deal a little bit. Where are you at with that? How many sorts of trucks have you sold there? And how is that being received in the market and your customer? Andrew Littlefair Right. So just as everybody else Rob, we’ve made some we call them tank deals right. So we made some deals with Chart and Agility where we have been able to get some special pricing for Clean Energy customers. We pass that pricing on to the customers. We’ve — our first offering with the Chart was over subscribed and so we are moving on to the next tranche of LNG tanks there. Agility as you know it wasn’t signed as early as the Chart one. So we are just kind of getting going on that. But I’ll tell you what is one of the things I mentioned in my remarks is when you are able to really bring 20%, 30% out of the cost of the tank package, you get the customers’ attention. And it is meaningful and it really offset this reduction in the savings between diesel and natural gas. So it is really meaningful and I have no doubt that over the course — especially with this new deal with Cummins Engine Company. Agility that really makes this I think even a better offering. And I have no doubt that it will before the year is out we will make substantial progress on moving through all those tanks. Rob Brown Okay, good. And then last question just sort of big picture. What’s sort of your latest thinking on the penetration rate in the trucking market this year with the current commodity environment? I guess the refuse market as well? Andrew Littlefair Well, the refuse market, I am out of the business to predicting how many trucks right. So you are going to have to — if you want truck numbers you are going to get that from Cummins or somebody that’s little closer to it. We haven’t seen Rob a fall off. And in the fact that I think if you put in new big UPS order for the 2015, I think we are going to be all pleasantly surprised that it is holding up very well. We haven’t seen customers — that the few customers that we have that have been on the fence are still on the fence. And but the customers that, this 600 or 800 so that we have on our pipeline, we haven’t seen anybody run for the exits because of this, they know that price of oil and diesel is volatile. I think frankly we’ve already seen the price come up here in California diesel is about $3 and $0.30 some odd, the other parts of the country it is lower. Gasoline, is of course is up dramatically nationwide and here in California so we are seeing the price kind of come back. I really think that with these big investments that you have seen these companies and there are products that are available and more product offerings. I feel pretty good about the way that the adoption rate is going. We see more customers taking more trucks and we still have some that are starting out with the 10 or 15 but the Raven is a good example where they had 75 trucks, now they have taken another 115. They are talking about taking even more, deal in trucking are very good example. What UPS has done. You know, Ryder is quietly fielded 900 natural gas trucks and Penske I think it is up to a couple of hundred. So you are beginning to see these really major fleets continue to take trucks and so obviously much higher oil price and diesel price would probably give more acceleration to it. But I feel pretty comfortable that we are — it is going along pretty well. Operator Thank you. Our next question comes from the line of Noah Kaye with Northland Capital Markets. Please proceed with your question. Noah Kaye Thank you for taking my question. Just wanted to follow-up on the question on Redeem. The RIN markets for Cellulosics that continue to be valuable, as you start to expand this part of the portfolio; can you talk a little bit about where your margins are at right now for Redeem? And how much of that is coming from the credits? Is there a way to think about that? Bob Vreeland Yes, well, I mean certainly part of that margin comes from the credit, probably go out get into exactly what that margin is but the thing is that with the Redeem those credit there is real market out there. That’s one of the things that we really seen driving this whole product line is that with the — being 90% cleaner to diesel and the whole renewable, sustainable environment, it is driving a lot of big players to say they want some of it. So that’s making the credits a very valid — there is a very valid fluid market for that and so it is kind of factors in there like we are doing most all of other fuel deals where we’ve got kind of cost of gas plus right. And so that factors into the equation. It is just — I can’t tell you exactly what that number is but it is meaningful. And it aligns with the flow of gas. So it is not kind of separate credit it is dangled out there. It is as we fuel those credits are generated. And so it goes right lock-toe in step with the flow of green gas as we call it. Noah Kaye And there’s plenty of runway in your view for the growth of biogas within that tranche of the RFS, correct? Bob Vreeland Correct. Yes, that’s one thing is that the supply — so the supply market is — there is definitely supply out there, absolutely. And it is plentiful. I mean there are a lot of landfills out there. They are producing a lot of methane they just going up in smoke and burning into the atmosphere. And so that’s where the supply is coming from. And we are a good taker of the supply because of our distribution network. Noah Kaye The methane has to be upgraded to your pipeline quality biogas, correct? Bob Vreeland Right. Noah Kaye So you are — but you believe that there’s plenty of biogas supply out there for takers? So is this basically a takers’ market for you right now? Or are you supply-constrained in any way? Bob Vreeland We are not supply constrained at the moment but I mean as folks realize that they are going to put kind of essentially on the same natural gas into whatever they are fueling, but yes this is renewable, truly renewable gas. 90% cleaner than diesel then all of a sudden it start to get pretty attractive. Now and so there is a lot of economics, it surrounds all that but for these clients are pretty substantial that you put on these landfills and dairies whatever it is to capture the stuff but the supply is growing. Andrew Littlefair Obviously, Noah, if you had for instance in this — in the California market or Southern California market, if the LAMTA which is the largest transit fleet in the United States, if they shifted over to bio-methane we would like to think for Redeem, that would be 60 million gallons right annually that we would show up. And so that would make a big impact on the availability. But right now there is a plenty of– there is plenty of supply available. It is more than what people would imagine. Noah Kaye Okay, great. Finally one unrelated question. You touched on NG Advantage and obviously the transportation market. Can you give us an update on the rail opportunity, what you’re seeing out there? Any major tenders coming? How would you kind of characterize that market opportunity? Andrew Littlefair Right. I think the rail opportunity is going to be very large. And as we’ve discussed on these calls before, it is a 3 or 4 billion gallon annual market with just a handful of players. I know one of the top tier players has 6,600 locomotives that on average use 800 gallons a day. So you are talking about significant usage and savings. What I can’t tell you is right now the two — the only two locomotive manufactures in the US are both bringing natural gas product to market. And three at least three may be four, but I know for sure three of the tier one rail companies are all in test. One of them are think is little further along than the others. Well, they are out actually on open track before different locomotives right now. So, yes, they are moving along of course these are long-lived assets; the locomotives are 30 years assets. So you are going to see a lot of the fleet be converted, I am told right now that they are feeling pretty comfortable they can get to 70% displacement i.e. they reduce 30% diesel and 70% natural gas. That’s significant savings. And so yes it takes a while, there is a Federal Railway Administration rules and there is a couple other groups they got to go through in terms of the LNG tank car tenders, but all of this is doable and all workable. And I think you will see the rails on next year or so begin to bring this into their fleet in a meaningful way. I think frankly it is going to go faster when it goes than the marine. Noah Kaye And you expect this will be an LNG opportunity rather than CNG? Andrew Littlefair Yes. It will be LNG. And just so unclear but we are not really allowed to say too much here. We are working with all those tier one firms right now. Operator Thank you. Our next question comes from the line of Andrea James with Dougherty & Company. Please proceed with your question. Andrea James Hi, thanks for taking my questions. The gallons delivered were up nicely sequentially and year-over-year at a better mix. The question is how much of that is tied to some of the recent announcements you’ve made? Or I guess put another way what’s sort of the time between you announce something like the Raven or the most recent UPS deals and when it shows up in the numbers? Andrew Littlefair Well, I’ll let Bob, let me tell you what I think it is then Bob if he had some that– I am not quite familiar with so like the Raven, we haven’t seen any volume yet. We have some existing business with Raven but those new 115 haven’t been delivered yet. So it kind of depends I would say anywhere between — it kind of depends on what they’ve ordered and you are talking about from the time they are willing to let us announce or the fleets willing to announce by the time they receive a truck, that could be three or four months. Now the UPS, let me make a caveat there, the UPS volumes, those trucks are fueling already in Southern California and so that can start immediately. And when we made a recent– I don’t know that we have an announcement but we made recent addendum to our national fuel agreement with Dillon. Well, Dillon trucking is already running trucks and so now they are going to begin to use three or four of other stations, so that we’ll come on immediately. Well, when it is a new ground up they have to get those trucks, we may have to build the station and so there is lag, gradual, it is gradual Bob Vreeland So we will some of that but it doesn’t all hit at once but it is moving. Andrew Littlefair The other thing that we see is in just a little bit more mature entry is like refuse, there is a very established pattern of when they go before their companies and do their budgets and then they order their trucks. So when they begin to take delivery of the trucks, that’s why we always got to see a little bit of low over the winter time in the first quarter and they begin to — because they do their budgeting I think like September or something, then they begin to take all those trucks, begin to show up March through kind of the third quarter. So we seek kind of bulge coming on the refuse side. Andrea James And how many stations are you guys operating now? Andrew Littlefair Well, we operate over 500 to 700 I think. We only own about 257 and we operate about 300 Andrea James And America’s Natural Gas Highway, how many of those are open? Andrew Littlefair So there are about 40 as of few days ago, there are about 43 of those open right now. Andrea James And that’s double year-over-year? Andrew Littlefair Yes. Andrea James And how many are like kind of built but ready to go? Andrew Littlefair 50 Andrea James Okay, so you’re almost — you’ve almost — Andrew Littlefair We are making headway and we’ve got eight more that will be open, that already slated to be open by the end of August and then we have about another four that are kind of little bit — we are just waiting to sign those deals and there will be other issues. So I hope we can’t control this exactly. It is kind of depends on the adoption rate of the trucks. But I hope that over the course of the year we will get another 20 or so open so then we will be down to where we only have about 20 to go or so in that number. Andrea James Okay. And then forgive me this one; your diluted shares outstanding fell a little bit. Can you please remind us again what that’s tied to? Bob Vreeland It is exercise of options and how much you talked about? During this quarter or kind of from last year like the year-over-year? Andrea James Well, yes it was like little bit. Go ahead Bob Vreeland We had back and late 2014, we took out about 4 million shares related to a warrant with GE and just the accounting treatment was — we determined that — those shares wouldn’t be in our outstanding share so there was about 4 million that just kind of came out at the end of last year. So when you compare say this year to last year, you are seeing same quarter — you are seeing that fairly significant number come out of shares which was just kind of an accounting entry if you will. Andrea James Got it. And even sequentially, they’re down a little bit too? Bob Vreeland Yes. That’s just normal exercise activity, lot of options or not, yes. Operator Thank you. Our next question comes from the line of Pavel Molchanov with Raymond James & Associates, Inc. Pavel Molchanov Hi, guys. Thanks for taking the question. Of your volumes in Q1, how much came from NG Advantage? Andrew Littlefair What’s in the industrial? What’s your industrial number? Bob Vreeland Yes, close to 5 million, just little shy, probably over 5 million. Andrew Littlefair I think it is like 4.7 or — Pavel Molchanov Yes, okay. And that reflects a full quarter of your ownership or majority interest I should say? Bob Vreeland It does. Andrew Littlefair It does. Pavel Molchanov Okay. And on the — when I look at the income statement, the minority interest income that this quarter looks like the positive $380 million, I assume that — $380,000, I’m sorry. Yes, Indeed. That includes the debit for external owners of NG Advantage? Bob Vreeland Correct. That’s what it relates to. Pavel Molchanov Okay. And any other kind of variable interest entities in there? Andrew Littlefair No. Pavel Molchanov In that minority interest line? Andrew Littlefair Correct. Operator There are no further questions at this time. I’d now like to turn the floor back over to management for any closing or additional remarks. Andrew Littlefair Thank you, operator. And thank you everybody for joining us today. We look forward to updating you on our activities in the next quarter. Operator This concludes today’s teleconference. You may disconnect your lines at this time. And thank you for your participation.