University of Colorado Leeds School of Business

Business Plan Competition

December 12, 2002

Management

“Save the world, have fun, make

money” - Amory Lovins

James Snyder – President & CEO

Tina Weiler – Vice President of Sales & Marketing

Dwight Badgley – Vice President of Finance

Sally Keefe – Vice President of Logistics & Operations

Key Points

Specific target market Organic & Natural products industry California’s $160 Million shipping market

There is a need! Organic & Natural goods producers have articulated

their problem

This is absolutely possible! Engine technology exists Refueling infrastructure exists

Company Overview

Clean burning natural gas trucks

Benefit – Enhanced marketing message by being clean from stem to stern

Benefit – Helps them adhere to their company mission

Trailer Co-BrandingBenefit – Enhanced advertising &

promotion strategy

Company Overview

Trailer co-branding Creates over 830,000 impressions per month 75% formulate an opinion of the company 29% will make a buying decision

Big Clean Trucks translates to new customers and increased sales for our clients

Target Market Strategy

“Absolutely -Hansen’s is always looking for ways to bolster our environmental efforts.” Tom Cally – Hansen’s Natural Beverages

“The public relations and marketing benefits of green transportation would be very real for us.”Laura Coblentz – Director of Marketing Horizon Organic Dairy

Interviews with decision-makers in our target market confirm interest in this business concept

“Big Clean Trucks has substantial opportunity to build a great package of marketing and environmental benefits for its prospective customers.” Mark Retzloff – Chairman & CEO Rudi’s Organic Bakery

Competition

Strengths Established relationships

with our target customersEstablished reputationUnlimited range of routes

WeaknessesDiesel incompatible

with green companies’ values

Low innovation in logistics technology

Small local competitors are unable to compete with us because of the high switching costs associated with changing their fleet to alternative fuel

Large national competitors will choose not to compete with us because the California Organic & Natural products market is too small

Lead time advantage

Competitive Advantage

Refueling Infrastructure

12 within 500 miles of Los Angeles

50% growth of LNG refueling stations in U.S.

Regulatory pressure for cleaner fuels is spurring infrastructure expansion

Risks

Refueling infrastructure availabilityExpand as infrastructure develops

Receptiveness of our target marketThe transportation budget in our target

market is $160 MillionWe only need 1.5% of the market to

breakeven

Revenue

Revenue Model85% trucking

(# of miles)15% co-branding

(# of trailers)

Pricing StrategyTrucking

comparableCo-Branding at

premium

(500)

0

500

1,000

1,500

2,000

2003 2004 2005 2006 2007

Net Income( In thousands )

Profitability

CostsFuel/MaintenanceCapital

expenditures

Co-Branding Revenue

BreakevenOctober of year 3

(2005)Profit Margin 0% 0% 7% 14

%16%

Funding$2.5 Million of funding required

Startup and 9-month operating expenses

$2 Million Preferred EquityRepresents 49% of companyAssuming 60% IRR

$500,000 Debt Used specifically for capital expenditures

Exit Strategy Acquisition by major trucking company $14 million for preferred shareholders

Conclusion

Specific target market California’s Organic & Natural products industry $160 Million shipping market

There is a need! Organic & Natural goods producers have articulated

their problem

This is absolutely possible! Engine technology exists Refueling infrastructure exists

Questions?

Mission Statement

Provide high quality, reliable truckload transportation services for clients that are committed to increasing the environmental performance of their supply chains. 

Utilize the most innovative engine and logistics technologies available to provide superior trucking services while decreasing pollution.

Treat our employees as professionals and provide a healthy, fulfilling, and rewarding workplace.

Revolutionize the trucking industry by inspiring shippers and carriers to demand environmental performance in transportation services.

Value Proposition

Big Clean Trucks is the first to provide a clean shipping option to the organic and natural products industry. We provide a distinct marketing advantage to our customers by allowing them to show their commitment to the environment.

Potential Customers

Company Sales ($MM)

Shipping

Budget

Horizon Organic

$159 $4.8

Stonyfield Farms

$96 $2.9

Hain Celestial

$396 $11.9

White Wave $23.5 $0.7

Alberts Organic

$100 $3.0

Hansen’s $98 $2.9

TOTAL $872 $26.2

We only need $3 million of this $26 million opportunity

Trucking Industry

$606 billion annual spending on trucking500,000 carriers operate 20 million trucks68% of U.S. freight tonnage hauled by

truck81% operate 20 trucks or fewerExpected earnings growth of 13%

CPM for Advertising

CPM for Advertising Media

$0.00

$5.00

$10.00

$15.00

CPM

Truckside advertising is a better buy than other advertising media

Truckside Advertising

833,000 impressions per month75% form an opinion of company =

624,00029% make a buying decision = 180,000Assuming a 1% conversion rate:

1800 new customers per month!

LNG is Cleaner

97% less sulfur dioxide60% less particulate matter50% less nitrogen oxides90% less carbon monoxide98% less VOC’sNo benzene emissions

Translates into 95% less emissions

Big Dirty Trucks

40.5%

60.6%

69.4%

37.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

NOx PM-10 PM-2.5 SO2

Heavy-Duty Diesels' Share of Total On-Road Vehicle Emissions

Heavy-duty diesel trucks contribute over 50% of the total on-road vehicle emissions

Diesel & Health Problems

Diesel fumes cause 125,000 people in the US each year to get cancer

A child born in southern California only has to live there for 12 days before they accumulate a lifetime’s acceptable cancer risk

In 2020, asthma could affect up to 29 million Americans, which is more than 2 times the current number

132 million Americans live in areas where it’s unsafe to breathe because of air pollution

Emissions Standards

EPA - increased emissions standards for trucks

2004 regulations went into effect October 1, 2002 Industry transgressionsNon-conformance penalties

2007 additional reductions required

Customers

“Having the organic product transported in an environmental truck would be a great benefit. The idea is great and the marketing concept is superb."Mike Paganos – Odwalla

“Alberts being a green company would look very hard at this”Barclay Hope – President Albert’s Organic

“Our customers are very sensitive to the environment. People look to companies like Horizon to make steps forward.” Steve Jacobson – VP of Operations Horizon Organic Dairy

“Your team has an interesting idea that we would certainly consider”Rob Kirby -VP Marketing Spectrum Foods, Inc

Customers

LNG Refueling Infrastructure

U.S. Trucking Traffic

Grants and Incentives

Tax incentives at state and federal levels Fuel Refueling infrastructure Alternative fuel vehicles

Many state and federal grant programs not renewed

Carl Moyer program in CA Federal Highway Administration (FHWA) EPA and DOE

Cannot rely on grants for funding, but will continue to investigate the possibility

Diesel/LNG Comparison

Diesel LNGPollution Cancer

causing95% less emissions

Political 65% in Mid East

36% in Mid East

Infrastructure

Nationwide 44 total

California Trucking

$100 Billion market, $160 Million in the Organic & Natural products industry

25,000 trucking companiesTrucks move an average of 2.2 million

inbound tons per day and 2.0 million outbound

Carry 89% of all manufactured freight transported in California

Employs 1 of every 12 workers in the state

Tax Considerations

Net losses in first three years

Tax loss carry-forward through year 4

$50,000 federal tax deduction (per truck, per year)

Year 5 taxes of $373K

2% of Revenue

6% of Revenue

0

50

100

150

200

250

300

350

400

2003 2004 2005 2006 2007

Taxes( In Thousands )

Pricing Sensitivity

If 100% of firms use our co-branding, then 0% premium on shipping rates.

If 0% of firms use our co-branding, then 20% premium on shipping rates.

0%

5%

10%

15%

20%

% in

crea

se in

tr

uck

ing

ch

arg

e

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

% of co-branded trailers

Trucking Fee vs. Advertising Percentage-Sensitivity Analysis

Cash Burn/Build

Major uses Property and

equip

Major sourceIncrease in A/R

Cash Flow

Neutral in May of year 2(May 2004)

Major uses Property and equip

Major sourceEarnings

Cash Flow

Operating CF’s growing in relation to investing

CF neutral just after the 5th year of operations.

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

2003 2004 2005 2006 2007

Operating and Investing Cash Flow, net(in thousands)

Breakeven

End of 2004(year 2)

$2.8 million in revenues

Market Share

2003 =0.1%2004 =1.5%2005 =2.1%2006 =2.9%2007 =3.7%

Diesel/LNG Cost ComparisonsTotal cost per diesel truck ~$100,000Total cost per LNG truck ~$145,000

Diesel truck life = 1 million milesLNG truck life = 1.2 million miles

LNG trucks generate an extra $270,000 of revenue over life span

Development Strategy

Q1-2003

Q2-2003

Q3-2003

Q4-2003

ClientsEquipmentGovernmentInfrastructureEmployeesOperations