CALIFORNIA BUS COMPANY TURNAROUND BACKGROUND

Transcription

1 CALIFORNIA BUS COMPANY TURNAROUND BACKGROUND A NORTH AMERICAN BUS COMPANY (NABC) chose TRANSPORTATION STRATEGIES (TRANSTRAT) to initiate an analysis of one of its COACH COMPANY CUSTOMERS (CCC) to develop an integrated plan for both debt repayment and business sustainability. This analysis covers the following elements: Operational financial analysis Customer Portfolio Analysis Pricing Analysis New Business Opportunity Analysis This report will also provide creative and innovative input to support alternative ideas for consideration in the areas of: Financial Recovery Business Growth Business Sustainability The solution developed by TRANSTRAT was based on a realistic strategy designed to maximize value, minimize risk, effectively utilize available capital and provide the needed direction to a collaborative implementation team. The solution was comprised of three modules CCC will develop a plan to reduce its financial liabilities NABC will develop a re-finance plan to enable CCC to operate at target margin points. NABC, CCC and a 3 rd party maintenance company will develop a program to improve the maintenance of buses and vehicle up-time (utilization rates) CCC will partner on new large contracts with a larger more established motorcoach company who will also act as corporate mentor. Working collaboratively, the NABC, CCC and TRANSTRAT had the unique combination of capabilities to achieve a value break-through that built in efficiencies, generated targeted results and created a sustainable solution. 1

2 TABLE OF CONTENTS SECTION PAGE SECTION ONE: INTRODUCTION 3 Corporate Information Organization Description, History Organization Structure Fleet Safety SECTION TWO: MARKET AND PRODUCTS 3 Market Description Lines of Business Services and Marketing Customer Portfolio Opportunities SECTION THREE: PRICING MODEL 7 Overview Charter Pricing Tour Bus Pricing Break-Even Recommended Pricing SECTION FOUR: VEHICLE MAINTENANCE and FACILITY 14 Maintenance Program Facility SECTION FIVE: SUSTAINABILITY 15 Growth Program Recovery Program SECTION SIX: FINANCIAL PLAN 19 2

3 Financial Status SECTION ONE: INTRODUCTION 1. CORPORATE INFORMATION CCC Inc. is a privately held bus transportation company. It is a California registered company. There are no holding companies, parent organizations or subsidiaries. 2. ORGANIZATION DESCRIPTION, HISTORY CCC Inc. has been operating since the mid 2000 s. It operates from a facility in the southern California area. The owner s vision is to establish a profitable sustainable family business that will provide a financial platform now and in the long-term future for his family and staff. A part of the vision is that he will be succeeded in the business by one of his children. 3. ORGANIZATION STRUCTURE CCC is a lean organization. The staff of CCC includes: GM General Management, Contract Sales, Fleet Maintenance SALES DIRECTOR Charter Sales, Customer Service, SAFETY AND COMPLIANCE DIRECTOR Training, Log Management, Dispatch, Payroll and Accounting 12 Full-Time Drivers 5 Sub-Drivers 1 Mechanic 4. FLEET CCC operates a fleet of 11 NABC motorcoaches and 1 mini-bus. They also operate a fleet service truck for road-side service purposes. Eight (8) of the buses are 2005 NABC coaches. Three (3) additional NABC buses were purchased. There is one each of the 2004, 2005 and 2006 models. There were three finance companies supporting the acquisitions. 5. SAFETY A review of CCC s DOT Safety Scores (SAFESTAT) indicated that they have average driver scores and better vehicle scores. The CCC driver team appears to be an experienced close knit group and customer feedback indicates they are service focused. Peer-to-peer training is the company methodology. 3

4 SECTION TWO: MARKET AND PRODUCTS 1. MARKET DESCRIPTION CCC operates out of southern California and services the far southwestern US. Most frequently traveled stated are California, Nevada, Utah and Arizona. Additional destinations are determined by the specific itinerary of a requested tour. The market appears to be highly fragmented. There are between 25and 35 competitive bus charter companies in the market area with 10 or more coaches. As is the case with most highly fragmented markets, there is a significant downward pressure on rates due to either inexperienced or low cost operators. According to CCC, the San Diego and LA markets suffer have many small family carriers who operate with older buses and at very low rates. CCC indicated that the highest daily charter rates for the top customer tier does not exceed $1200 and are most often in the $1000-$1100 range. This is borne out by a review of local rates sorted by price where the average daily rate is about $900 and a host of companies offering rates at $875 or lower. As a point for comparison, CCC indicated that in the San Francisco market is more lucrative with daily charter rates between $1000 and $1250. Due to the abundance of famous National Parks and nearby Las Vegas, the primary service provided by bus companies is tours. This is followed by Shuttles supporting the convention business, airport transfers for groups that are LA-area bound only, the Corporate Charters then Special Events. There appears to be a significant and even more competitive limo and mini-bus markets which CCC does not compete in. 2. CCC LINES OF BUSINESS CCC is primarily and foremost a tour bus operator. CCC tour bus revenue is approximately 87% of its total portfolio. CCC also offers the following services: Corporate Charters Tours Shuttles Airport Transfers Special Events These services are operated as secondary services for the motorcoaches as the tour business has the fleet on the road over 75% of the time. The above services are operated more during the slow season and in between tours when buses are available. The CCC minibus operates shuttles and airport transfers on a daily basis and can be considered almost an annuity source of revenue. 3. SERVICES and MARKETING Within the tour bus business, CCC offers: 2-3 day tours to specific National Parks or Las Vegas 3-5 day tours to a sub-set of national parks in a specific geographic area 7 day extended tours to the major national parks 4

5 14 day extended tours to most all national parks The service portfolio offers CCC high fleet utilization, but as the fleet is operating tours over a wide geographic area, in the event of a breakdown, recovery services are both expensive and sometimes long term. For service continuity, CCC has the following service escalation ladder: Guided service from CCC central to the bus operator If a service facility is nearby, attempt over night repairs If no service facility is nearby, attempt service via CCC service vehicle If vehicle cannot be repaired: o find and contract for a substitute vehicle until CCC vehicle is repaired and can join the group or o Send a CCC replacement vehicle from LA. CCC marketing is focused and traditional. Marketing dollars are spent on: Brokers direct marketing Online web listings with additional dollars paid for page one positioning The CCC Website is their tool for general marketing Since CCC has developed an excellent reputation within its market it also relies in word of mouth. CCC does not advertise nor does it do any direct mailing or utilize point-of-purchase (POP) materials. 4. CUSTOMER PORTFOLIO The current CCC customer list numbers forty-three (43). The chart below provides the revenue $ and revenue % for the current customer portfolio. CLIENT TYPE % REVENUE REVENUE PER SECTOR 19 Tour Companies 58% $1,461, Religious Groups 19% $478, Brokers 10% $251, Schools 5% $125, Private Charter 4% $100, Corporate 3% $75, Government 1% $25, TOTAL 100% $2,519,

6 CCC is somewhat leveraged in that five (5) companies make up 65% of the company s revenue or $1,640,000. This is also a positive indication of high customer loyalty. The bus tour line of business is represented by the first 3 client groups and is 87% of CCC revenue 5. OPPORTUNITIES The following are lines of business that CCC could pursue that would balance its portfolio: University Sport Team Contracts. Given the number of Universities in the area. This is currently limited because using the existing fleet; it competes with the tour business. Corporate Shuttles Contracts for companies with large campuses or parking operations is an area that requires smaller vehicles, less investment, consistent revenue and is local. Establish a tour company and offer package tours not just the transportation. This means offering a more vertical integrated service offering and would increase margins. Bus Maintenance Service Center to service all of the independent operators. This service is currently being done on your premises informally so it can be converted into a formal service operation. Each of the above would require a strategy, business plan and implementation process. SECTION THREE: PRICING MODEL 1. Overview The CCC pricing model and process is fluid. There is a high and low season for tours and visitors to the LA region. There are different pricing models for type of service (Charter, Tour, and Day Trips). Discounts are given subjectively based on the client, their history and sometimes their need in the case of nonprofits. In an initial discussion with the CCC Sales Rep, the following charter pricing guidelines were provided. CCC PRICING GUIDELINES HIGH SEASON LOW SEASON UNIT $ $ Daily $ 4.50 $ 4.00 Per Mile $ $ Hourly $ $ Waiting P/Hour 15% 15% Tip $ $ Cleaning Dep. 6

7 Charters had decent margins as are illustrated in the sample pricing table below but only represent 10% of the business. Tour pricing which is 87% of the business, is a separate process and it is driven by the Tour Company or broker and is often a take it or leave it proposition. CCC has the view that volume offsets price point to a point. Therefore, tour pricing is dependent on the quality of the tour operator: Economy Tour Operators are in the $800-$825 per day range Standard Tour Operators are in the $825-$875 per day range Quality Tour Operators are in the $875-$950 per day range CCC does not have a pricing template that illustrates the costs and P/L of its tour bus contract. This is provided in the section below and has significant impact on cost management, fleet financing and pricing strategies. 2. Charter Pricing In an initial assessment, the CCC sales rep was asked to provide quotes for a 1, 3, 5 and 7 day charters where they are pricing independently. s, which were collected separately where applied to determine the gross profit. Overhead ($108 per billable day) and payroll taxes (23% of Labor) were not included in the cost for this analysis. QUOTE FOR A 1 DAY CHARTER $ LA Trip DAYS 1 MILEAGE VEHICLE COST $ % INSURANCE COST $ % MAINTENANCE COST $ % FUEL COST PER GALLON $ 4.50 GALLONS $ TOTAL FUEL COST $ % REGISTRATION COST PER VEHICLE PER DAY $ % CLEANING $ % LABOR no payroll taxes $ % OPERATING COST TOTAL $ % CONTRIBUTION/PROFIT $ % 7

8 QUOTE FOR A 3 DAY CHARTER $ 3, Las Vegas Tour DAYS 3.00 MILEAGE 650 VEHICLE COST $ % INSURANCE COST $ % MAINTENANCE COST $ % FUEL COST PER GALLON $ 4.50 GALLONS TOTAL FUEL COST $ % REGISTRATION COST PER VEHICLE PER DAY $ % CLEANING $ % LABOR no payroll taxes $ % OPERTING COST TOTAL $ 1, % CONTRIBUTION/PROFIT $ 1, % QUOTE FOR A 5 DAY CHARTER $ 5, National Park Tour DAYS 5 MILEAGE VEHICLE COST $ 1, % INSURANCE COST $ % MAINTENANCE COST $ % FUEL COST PER GALLON $ 4.50 GALLONS TOTAL FUEL COST $ % REGISTRATION COST PER VEHICLE PER DAY $ % CLEANING $ % LABOR no payroll taxes $ % OPERATING COST TOTAL $ 3, % CONTRIBUTION/PROFIT $ 2, % 8

9 When Overhead and Payroll taxes are included the: 1 day Charter Profit = $30 to $35 estimated 3 day Charter Profit = $900 estimated 5 day Charter Profit = $1400 estimated 7 day Charter Profit = $1750 estimated 3. Tour Bus Pricing Analysis QUOTE FOR A 7 DAY CHARTER $ 7, National Park Tour DAYS 7 MILEAGE 2000 VEHICLE COST $ 1, % INSURANCE COST $ % MAINTENANCE COST $ % FUEL COST PER GALLON $ 4.50 GALLONS TOTAL FUEL COST $ 1, % REGISTRATION COST PER VEHICLE PER DAY $ % CLEANING $ % LABOR no payroll taxes $ % OPERATING COST TOTAL $ 5, % CONTRIBUTION/PROFIT $ 2, % Tour pricing is most often dictated by the tour operator. They try to leverage their volume and attempt to acquire rates of $825 to $900 per day. As part of a potential solution, CCC indicated that they had a number of large potential contracts with tour companies if NABC and a 3 rd party would collaborate to support them as they did not have the fleet size to go after these larger operators. CCC was instructed to test the waters of these opportunities in terms of fleet requirement, rate, period, number of days, starting and finishing dates. CCC collected data from a number of companies and the data inserted into a cost based pricing template to forecast the P/L for each opportunity. Volume does not make up for marginal profitability. A further review of pricing was needed. The process for the pricing analysis with supporting data follows. 9

10 STEP 1: Calculate Operational s for an 8 bus contract opportunity: TOUR COMPANY TOTAL 2011 Time Months Buses NABC Late Model Period - Months Monthly Lease Payment Amount** Lease Payments Maintenance March - Nov 8 5 TYPE A $ 3, $ 132, $ 83, Insurance Registration AVE. MPG FUEL COST PER GALLON 6000 miles per month 6000 miles per month Prep s (if applicable) Operating $ 35, $ 9, $ , $ 270, $ 37, $ 567, Utilization Rate Utilization Days Daily Operational 83% $ **Vehicle cost is based leasing pre-owned NABC s valued at 5% with $140,000 Balloon. STEP 2: Calculate Labor s $110 Per Day Payroll 23% Driver Daily Driver $ 110, $ 25, $ 135, $ **CCC pays drivers between $100 and $125 per day. 10

11 STEP 3: Calculate Overhead s Here is an overhead calculation based on CCC cost data. s were allocated to the 8 bus contract as a % of fleet size and time. STEP 4: Calculate Contract P/L OVERHEAD COSTS Category Monthly Annual Contract Allocation Office Salaries $ 12, $ 144, $ 46, Rent $ 4, $ 84, $ 26, Training $ 4, $ 10, $ 3, Prof Fees $ $ 5, $ 1, Advertising $ $ 3, $ Radio Comms. $ $ 12, $ 4, Supplies $ $ 2, $ Driver Transport $ $ 9, $ 2, Driver Supplies $ $ 1, $ Testing $ $ 2, $ Inventory $ 3, $ 50, $ 16, Misc. $ $ 5, $ 1, Service Truck $ 1, $ 12, $ 3, TOTALS $ 28, $ 339, $ 62, Daily Contract Overhead $ s assume a fleet of 16 buses (vs. current 11) and an allocation for the 5 buses of the 16 (32%) for the contract. Fleet Daily Operating Daily Overhead Daily Driver Labor Total Daily Contract Price 5 $ $ $ $ $ Contract Value Daily Margin Contract Days Contract Profit Monthly Profit Profit Margin $825, $ , $ 19, $ 2, % 11

12 The analysis of this 8 bus contract opportunity illustrates that volume $825 per day are essentially break even. Based on the stated costs, the daily rate needs to be $900 to make a profit of 10%. For this contract $825 is the breakeven point. 4. Break Even Analysis For the Current Business The above analysis was for a potential opportunity and did not cover his actual break even cost number for the existing business. Using the same 4-Step Process the goal was to determine the current cost per bus on a daily basis: Step One CURRENT OPERATIONAL COSTS CURRENT SITUATION BREAK EVEN ANALYSIS Data Points For 1 Bus Time Months Buses NABC - Late Model Current 12 Lease Period - Months Monthly Lease Payment Amount Annual Lease Payments 1 TYPE A $ 4, $ 54, Annual Annual Annual Property FUEL Annual Fuel AVE. Annual Maintenance Insurance Registration or Excise COST 120,000 MPG Gallons Tax GALLON miles per year $ 20, $ 9, $ 2, $ , $ 90, Step Two: CURRENT LABOR Prep s (if applicable) Annual Operating Utilization Rate Annual Utilization Days Daily $ - $176, % $ Labor Payroll 23% Fully Loaded Driver $ $ $

13 Step Three: CURRENT OVERHEAD Based on data provided by CCC: OVERHEAD MONTHLY ANNUALLY OFFICE STAFF PAYROLL $ 12, $ 144, PAYROLL TAXES $ 7, $ 89, Rent $ 4, $ 48, Training $ $ 3, Prof Fees $ $ 5, Advertising $ $ 3, Radio Comms $ $ 5, Supplies $ $ 1, Driver Transport $ $ 6, Driver Supplies $ $ 7, Drug and Alcohol Testing $ $ Inventory $ 2, $ 30, Misc. $ $ 3, Service Truck $ 1, $ 12, TOTALS $ 50, $ 358, OVERHEAD PER OPERATING DAY (312) $ 1, OVERHEAD PER BUS PER DAY $ Step Four: CUURENT COSTS AND BREAK-EVEN POINT FOR A BUS ON AN EXISITING BREAK EVEN FOR 1 BUS Fleet Daily Operating Daily Overhead Daily Driver Labor Total Price Annual Contract Value 1 $ $ $ $ $ $259, Annual s Daily Margin Billable Days Profit Monthly MARGIN $ 248, $ $ 10, $ % Under the current cost model, the break-even cost per day is approximately $ per day. Assuming that some costs could be trimmed and utilization increased this number could drop in the $825 per day range yielding margins above 10%. 13

14 5. Recommended Pricing Strategy CCC, like all of its independent motorcoach contemporaries, operates in a dynamic environment where a great deal has to go according to plan to achieve its targeted profitability. Key elements: Utilization has to be high Maintenance has to be excellent to maintain utilization rates Sufficient inventory is required to minimize repair times It is best to operate at a target price point and size the business accordingly Fleet composition and financing has to fit the pricing model The risks on the other hand: Downtime is damaging and extended downtime can be catastrophic as it impacts utilization, often causes 2x costs as it requires a replacement vehicle from another company who often charge premium rates To maintain utilization, non-peak season sales efforts are required. A company needs to make its money in peak season and cover its costs in the off season Operating cheap does not mean operating profitably. It is better to right size the fleet that to be dragged into the lower end of the market. For CCC, the following is recommended for TOUR GROUP Pricing: Establish a Peak Season Price Minimum of $900 and target $950. Establish an Off-Peak Price Minimum of $825 and a target of $850. For CCC, the following is recommended for CHARTER Pricing: Establish a Peak Season Price Minimum of $950 and target $1000. Establish an Off-Peak Price Minimum of $850 and a target of $900 This will require: Identifying and target marketing higher end customers Leveraging the NABC/Mercedes Brand Affiliation Leveraging and communicating customer testimonials Focusing on CCC P/L and the needs of the company Right sizing the fleet to operate with a higher margin client portfolio Establish marketing partnerships with recognized clients/individuals Increasing process for customers currently below target levels or phasing out servicing these clients. 14

15 SECTION FOUR: FACILITY and VEHICLE MAINTENANCE 1. MAINTENANCE FACILITY CCC maintenance has one outdoor and one indoor service bay. It has a parts room/area, a conference/drivers room and an office with work stations for dispatch and sales support. It has parking for approximately coaches. 2. MAINTENANCE PROGRAM AND COSTS While it was not in the TRANSTRAT scope of work to review the maintenance operation (it was assessed independently), an analysis of maintenance costs per vehicle were revealing. The attached table reflects the approximate maintenance-related costs for CCC in 2010 on a per bus basis MAINTENANCE AREA PER BUS ANNUAL Preventative Maintenance costs $ 5, Mechanics $ 4, Master Mechanic (Chang part-time) $ 2, Tires $ 8, Emergency Repairs $ 6, Replacement Bus $ 3, PER BUS ANNUAL $ 29, The impact of bus breakdown can readily be seen. On-The-Road breakdowns cost CCC $10,000 per bus per year in This does not include additional driver transport if required. While this cannot be eliminated, if this could be largely prevented and maintenance costs drop into the $20,000 per bus per year range, it would significantly contribute to CCC s margin performance. It was also noticed that the part transportation costs are significant. The lack of a fully operational NABC parts distribution center causes NABC customers like CCC to bear additional shipping costs that impact overall maintenance costs. An improved maintenance program is required for CCC long term sustainability. 15

16 SECTION FIVE: SUSTAINABILITY 1. OVERVIEW After a review of the data there were some key elements that have led to the current situation: CCC pricing does not allow for sufficient margins to weather sustained business disruptions The maintenance issues have reduced CCC s cash flow as buses were not generating revenue Road break-downs increased its maintenance cost and eliminated margins from this particular trips The business disruptions caused by maintenance issues reduced revenue and have caused CCC to become delinquent in its vehicle payments. The increased maintenance repairs have increased operational costs further reducing the ability for CCC to meets its financial obligations It is apparent that the existing operation cannot generate the required cash flow to pay off its current overdue debt. However, CCC fleet it had a number of significantly large contracts it could obtain that could generate sufficient cash flow. Therefore a program was designed to: Stabilize the current business with a RECOVERY PLAN where CCC would re-focus its marketing effort, implementing a new pricing structure, eliminating its current debt, re-financing the current fleet debt and establishing maintenance competence within CCC or having it supplied by a 3 rd party. Establish a GROWTH PROGRAM which would be a portfolio of larger collaboratively managed contract(s) whose proceeds would be used exclusively create the capital needed to build a fleet to service the needs of the large high quality carriers.. Additional details for each of these programs follow. 2. RECOVERY PROGRAM CCC feels that is currently has a sufficient book of business to operate profitably providing it had 100% of its fleet operational. However, during the transition, it will not have 100% of its fleet available and will likely fall further behind in its financial obligations. Therefore, a recovery strategy is recommended to strengthen the core CCC business. The goals to this strategy: a) Operate all contracts with a 10% Margin by implementing a new pricing structure and shedding low margin customers b) Pay off its existing debt by right-sizing the fleet c) Re-Finance the Remaining Fleet d) Improve Maintenance Competence to increase fleet uptime e) Conduct on-going pricing analysis. The CCC pricing process is designed to keep vehicles moving, staff hired and cash flowing. However, it is not designed to optimize its own profitability. By putting in pricing software CCC should know what the margin and contribution is for every trip or contract. Contracts below 10% should only operate in the LOW or OFF PEAK season. 16

17 Additionally, CCC needs to go through its customer list and indicate the price it charges each customer. For any customer that is charged less than $850 per bus per day, CCC should meet with them to either negotiate a price increase transition to $850. If they refuse, CCC should transition from that particular client and replace it with a higher priced client through an improved sales and marketing program. f) There is no sales program that can pay off the debt completely in There are new business contracts that can make contributions to the repayment efforts but these will required at least a day transition to establish the required fleet and supporting infrastructure and would repay back a maximum of 75% of the amount currently owed. Therefore, the only short-term option to pay off the existing debt is through the sale of 1-2 coaches. It is a painful option but one that is required to correct CCC s balance sheet. The sale of 1-2 coaches IN COMBINATION with the other initiatives in this plan will position CCC for growth, re-establish trust in the CCC-NABC relationship and enable to implementation of the GROWTH PROGRAM. g) NABC has agreed to re-finance the debt on the remaining six (6) funded coaches that includes the costs of repairing all buses. This would bring CCC s monthly vehicle payment from $4800 to $3975 enabling improved margin performance as well as ensuring that CCC has nine (9) fully operational buses to support its existing book of business. h) To prevent the situation from repeating it is essential that an improved maintenance program be established for both its existing fleet and for future contract fleets. For its existing fleet, NABC has conducted an analysis of practices and procedures that need to be followed to maintain the existing fleet. That set of recommendations can be an addendum to this report as TRASNSTRAT has not seen the results of the CCC maintenance/service assessment. For potentially large future contracts (20 bus+), it has been agreed that this fleet would be supported by a new NABC trained team managed by an experienced 3 rd party service company. Another regional coach company was identified was mentioned a potential maintenance partner. It is also possible that a new facility be established for these new contracts and also be managed by the 3 rd party partner. Fleet management and funding would be based on the size, term and fleet requirement of the contract. It is anticipated that these four (4) initiatives that make up the RECOVERY PLAN are the pre-requisites for the almost simultaneous development and implementation of any growth strategy. 3. GROWTH PROGRAM This program/strategy was initially designed as a debt repayment plan if it could have been implemented in year one but as it is currently being planned there will be a partial implementation in year 1 and full implementation in year 2. 17

18 There is an apparent need that exists in large tour companies for larger high quality strategic partners to service its transportation needs. Currently, many of the tour companies treat bus companies and transportation as commodities and they have been experiencing deteriorating service, increased customer complaints and lower rates of trip continuity (= more problems that disrupt the trip). CCC has identified this need. Tour companies today put together a portfolio of transportation companies to provide transportation. Some companies will use 4-5 different companies with different values, service standards and fleets to serve its tour customers. This is because a single transportation company does not have the capital, fleet or infrastructure to service the needs of the larger tour companies. TRANSTRAT proposed the following strategy to be the platform for a GROWTH STRATEGY: a.) That a collaborative Alliance between CCC, a NEW PARTNER and NABC be formed to approach the larger tour companies to offer them a total tour solution. b.) The Alliance would operate separately from CCC with a separate facility, banking accounts. c.) CCC and the NEW PARTNER would share the sales, account management, dispatch and driver development functions d.) The NEW PARTNER would lead the maintenance, facility and inventory management functions e.) Fleet Management and Funding would be the responsibility of the NEW PARTNER and NABC To provide a sample of the revenue potential, we discussed the concept with a large California tour operator that had a contract that required a 20 bus fleet operating for 11 months 26 days per month. We conducted a collaborative cost / price analysis of the opportunity STEP ONE: OPERTIONAL COSTS CLIENT Time Months Buses NABC Year LARGE CA. TOUR OPERATOR Feb-Nov Late Model Blended Lease Period - Months Monthly Lease Payment Annual Lease Payments $ 5, $ 1,320, Annual Maintenance Annual Insurance Annual Registration Property or Excise Tax AVE. MPG FUEL COST PER GALLON Annual Gallons $ 200, $ 90, $ 49, $ ,

19 Annual 120,000 miles per year Prep s (if applicable) Annual Operating Utilization Rate Annual Utilization Days Daily $ 1,800, $ 100, $3,559, % $ STEP 2: LABOR Labor Payroll Additions Fully Loaded Daily 23% Driver $ % $ 748, $ 172, $ 921, $ STEP THREE: OVERHEAD COST ESTIMATE Category Annual Office staff $ 150, Rent $ 4, Training $ 10, Prof Fees $ 10, Advertising $ 5, Radio Comms $ 7, Supplies $ 2, Driver Transport $ 5, Driver Supplies $ 2, Testing $ 2, Inventory $ 60, Misc. $ 6, Service Truck $ 3, TOTAL $ 266,

20 STEP FOUR: P/L Daily Operating Fleet Overhead Driver Labor Total Price 20 $ $ $ $ $ Contract Value Daily Margin Billable Days Profit Monthly $ 5,928, $ , $ 1,180, $ 98, Margin 20% This collaborative model became the cornerstone of the growth strategy and was successfully implemented SUMMARY: The intervention was a success. CCC: re-structured its pricing model cleaned up its customer list re-focused its marketing effort re-structured its debt down-sized its fleet slightly identified a partner for larger engagements successfully acquired the larger contracts ordered additional vehicles for NABC CCC is now twice the size it was before the intervention. TRANSPORTATION STRATEGIES conducted the due diligence and identified the potential of the situation and then facilitated a series of win-win agreements to release the potential of the agreed solution. 20