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Surface Capacity-Is 2012 Finally the Tipping Point? [No]
Thom Albrecht, CFAManaging Director
(804) 787-8210talbrecht@bbandtcm.com
FOR REQUIRED DISCLOSURES, INCLUDING ANALYST CERTIFICATION, PLEASE REFER TO THE IMPORTANT DISCLOSURES SECTION AT THE END OF THIS PRESENTATION; Cover Photos: BBTCM; clip art on cartoon
Thom Albrecht804-787-8210
A Snapshot of Supply, Demand & Inventories
Classic early June Freight Picture Retail inventories in good shape
3
Note: red sections are loads, yellow are trucks. Source: U.S. Census Bureau
1.29
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8Retail Inventories / Sales, NSA
Mar # of 1.29 was vs. 1.31 and 1.34 in March '11 and '10
2004 201020092008200720062005 2011 2012
Thom Albrecht804-787-8210
4 Non-Conventional Signals: Mixed but Okay
4
Blast Furnace (Steel) Utilization
TOFC Loads (Piggyback/overflow) are Disconcerting
Sources: AMM, AAR and ACT.
0%1%2%3%4%5%6%7%8%9%
10%
1996
Oct
.Ju
l.A
pr.
1999
Oct
.Ju
l.A
pr.
2002
Oct
.Ju
l.A
pr.
2005
Oct
.Ju
l.A
pr.
2008
Oct
.Ju
l.A
pr.
2011
Oct
.
N.A. Class 8 Tractor Backlog Cancellation Rate
Cancel Percent Backlog
1997-1999 Average: 2.2%2004-2006 Average: 1.4%2011: 1.7%2012 YTD Average: 1.4%
0%
2%
4%
6%
8%
10%
12%
19
96
Oct
.
Jul.
Ap
r.
19
99
Oct
.
Jul.
Ap
r.
20
02
Oct
.
Jul.
Ap
r.
20
05
Oct
.
July
Ap
ril
20
08
Oct
.
July
Ap
r.
20
11
Oct
.
Total Trailer - Cancel Percent Backlog
Cancel Percent Backlog
1997-1999 Average: 2.1%2004-2006 Average: 1.0%2011 Average: 0.7%2012 YTD: 0.7%
-15%
-10%
-5%
0%
5%
10%
Week 1 3 5 7 9 11 13 15 17 19 21
-14.
3%
1.3%
-4.8
%
-4.7
% -1.7
%
-13.
7%
-12.
8% -9.9
%
-9.5
%
-8.3
%
-11.
5%
-11.
4% -9.0
%
-11.
4%
-13.
9%
-9.3
% -6.2
%
-10.
5%
-10.
2%
-10.
3% -8.9
%
-9.6
%
74.8%
66.8%
76.3%
45%
50%
55%
60%
65%
70%
75%
80%
85%
8/1
/09
8/2
9/0
9
9/2
6/0
9
10/2
4/0
9
11/2
1/0
9
12/1
9/0
9
1/1
6/1
0
2/1
3/1
0
3/1
3/1
0
4/1
0/1
0
5/8
/10
6/5
/10
7/3
/10
7/3
1/1
0
8/2
8/1
0
9/2
5/1
0
10/2
3/1
0
11/2
0/1
0
12/1
8/1
0
1/1
5/1
1
2/1
2/1
1
3/1
2/1
1
4/9
/11
5/7
/11
6/4
/11
7/2
/11
7/3
0/1
1
8/2
7/1
1
9/2
4/1
1
10/2
2/1
1
11/1
9/1
1
12/1
7/1
1
1/1
4/1
2
2/1
1/1
2
3/1
0/1
2
4/7
/12
5/5
/12
6/2
/12
Ca
pa
cit
y U
tiliza
tio
n
Thom Albrecht804-787-8210
4 More Signs are Relatively Okay
5
Truck Tonnage-Up 30 Straight Months
BIFMA (Business Institutional Furniture)Construction is up 6.0% yoy; non-residential is up 18% yoy
Chemical carloads,Wk22 +5.2%;(6-week rolling average up 7.1%)
Sources: Calculated Risk, ATA and AAR.
May 1980:-26.6%
Dec. '94: +29.7%
Dec. '95: -18.7%
Sept. '08: +8.1%
-30%
-20%
-10%
0%
10%
20%
30%
40%
30
50
70
90
110
130
Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10
Yr/
Yr
% C
han
ge
NS
A M
on
thly
To
nn
age
Thom Albrecht804-787-8210
4 More Indicators-On Balance Okay
6
Sources: American Institute of Architects, National Association of Realtors, Wright-DBC, Federal Reserve Board. EHS supply is 6.6 months, 3rd lowest since April 2006.
10
10.5
11
11.5
12
12.5
13
13.5
14
3/3
1/1
980
3/3
1/1
982
3/3
1/1
984
3/3
1/1
986
3/3
1/1
988
3/3
1/1
990
3/3
1/1
992
3/3
1/1
994
3/3
1/1
996
3/3
1/1
998
3/3
1/2
000
3/3
1/2
002
3/3
1/2
004
3/3
1/2
006
3/3
1/2
008
3/3
1/2
010
De
bt
Se
rvic
e R
ati
o
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
19
19.5
20
FO
R R
ati
o
Debt Service RatioFinancial Obligations Ratio
Thom Albrecht804-787-8210
Lending: Bottoming & Starting to Grow
-5% 0% 5% 10% 15%
C&I loans
RE loans
Consumer
Credit cards
11.3%
-0.7%
0.5%
-2.2%
Last 4 months
8
Source: Federal Reserve Board. C&I is commercial and industrial and RE is real estate
Thom Albrecht804-787-8210
The Gap Between Spending on Equipment & People is the Widest of Any Recovery
9
Source: Wall Street Journal, January 17, 2012
Thom Albrecht804-787-8210
Truckload Supply & Demand-At Equilibrium
Blue=TL Tractor Count
Red=Loads
Excess Supply
Sources: ATA TRAC and BBTCM analysis.
Thom Albrecht804-787-8210
Spot Market at High Levels Despite Mediocre Economy
11
Sources: TransCore for left chart; Internet Truckstop for right. On right chart, above 7.0 favors carriers; below 5.0 favors shippers; 5 to 7 is “neutral zone”, in terms of pricing and capacity. Picture source: K.W. Thompson.
2.2
3.0
4.8
6.3
8.7
9.8
9.2
11.3
12.9 12.8
12.1
8.8
6.9
9.2
15.1
18.7
20.3
19.7
14.7
14.2
17.1
16.5
13.4
9.2
6.4 6.5
8.9
11.6
7.4
14.1
11.1
9.8
17.2
18.2
14.8
10.0
5.4 5.2
7.1
8.8
9.5
10.8
7.6
5.5
4.9
3.93.3 2.9
2.22.9
5.0
5.5
6.4
7.3
4.64.4
4.8
4.3 4.3
4.5
3.6
4.8
7.2
8.5
10.1
12.8
8.5
6.1
5.14.1
2.52.1
1.9 1.81.9
2.3
3.23.5
3.03.4
3.9
3.6
3.94.2
4.5
6.2
8.1
12.2 12.2
11.3
8.3
7.5
8.07.7
7.4
7.6
7.5
11.3
14.5
13.6
11.7
14.0
12.1
10.9
12.411.9
11.2
9.69.3
11.9
17.316.8
19.0
0
5
10
15
20
Jan
-03
Jul
-03
Jan
-04
Jul
-04
Jan
-05
Jul
-05
Jan
-06
Jul
-06
Jan
-07
Jul
-07
Jan
-08
Jul
-08
Jan
-09
Jul
-09
Jan
-10
Jul
-10
Jan
-11
Jul
-11
Jan
-12
Monthly Market Demand Index (MDI)
Hurricane Katrina
The MDI increased 11% sequentially to 19.99 from 18.
Week ending June 11.
Thom Albrecht804-787-8210
Except for 2003 & 2005, the Truck Peak is Essentially Done by June & is No Longer in the Fall
12
Source: TCNAFI
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Percent
Change Y-O-Y
(DEC) 291 328 272 411 653 838 1060 396 582 294 597 927 1030 11.1%
JAN 209 289 248 329 563 716 710 354 562 242 556 901 994 10.3%
FEB 299 237 251 383 786 683 628 411 654 239 754 1244 1179 -5.2%
MAR 454 355 428 621 1156 981 928 703 934 303 1087 1761 1722 -2.2%
APR 462 391 523 715 1236 1039 936 771 1133 346 1355 1520 1782 17.0%
MAY 530 595 672 749 1294 1052 1098 904 1171 415 1313 1450 1812 25.0%
JUN 579 561 709 834 1445 1243 1215 987 1314 551 1220 1670 36.9%
JUL 424 454 599 814 1144 913 911 713 966 470 1045 1271 21.7%
AUG 491 519 611 839 1159 1006 803 566 746 514 901 1328 47.4%
SEP 478 488 616 944 1245 1381 603 493 684 574 945 1370 45.0%
OCT 526 511 649 1028 1227 1597 582 715 512 561 948 1319 39.1%
NOV 447 386 488 841 1063 1409 497 633 325 537 925 1261 36.3%
DEC 328 272 411 653 838 1060 396 582 294 597 927 1030 11.1%
TransCore North American Freight Index
Thom Albrecht804-787-8210
Why is Data So Much Better than Anecdotes?
• Load board velocity is slower; “crap” loads sitting longer
• ‘Non-bid’ “bids” keep a lid on rates• Coming capacity shortage has been
foretold since 2007 freight recession• Shippers unlikely to be caught off-
guard as in 2H’03-2004• Carriers still have slack in their
systems so utilization still being soaked up (see chart)
• Shippers 5 tools: a) Dedicated; b) Intermodal; c) More core carriers; d) more brokers; e) grow in-house fleet
Mark Twain: “Reports of my death have been greatly exaggerated.” Freight corollary? “Reports of the capacity shortage have been greatly
exaggerated.”
• Carriers are smarter about what they accept from spot market--
don’t have to take any load• Shippers’ inventory velocity is slow so ‘deep in route’ guide isn’t
a panic
13
-30%
-20%
-10%
0%
10%
40
60
80
100
120
Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
DRY VAN MILES mom % Chg
Thom Albrecht804-787-8210
What You All are Wondering…A Synopsis of Freight Since the Great Recession
• 2010: spot shortage and big surge from March-June
• 2011: spot shortage in March; Q2 good, not crazy
• 2012: amazingly calm, slow and steady
• 2013: depends on the election and Europe (partly)
• 2014: the next Nirvana? [think 1994, 2004-depends on HOS ruling]
Will another 2004 (Nirvana) ever happen again?
• Unlikely, but…• May ‘03: Bush marginal
rate tax cuts• June ’03: HOS announced
(effective 1-4-04)• ’00-’02: 3 years of high
carrier failure rates• ’01-’03: 3 years of corporate
cost cutting• Auto sales 16M units and
housing 1.8M units• 2014: might be
interesting… 14
Thom Albrecht804-787-8210
Key Equipment & Productivity Trends-Death by a Thousand Cuts! (Not the 2 ‘other’ theories)
15Pictures: BBTCM, JBT Photos; Facebook for “Death by a Thousand Cuts”
Thom Albrecht804-787-8210
Tractors: $40,000 More Expensive Since ‘01 But Nothing Added to Residuals; Shortage of Late Model Equipment Will Hurt Many Carriers
$125,000
$84,210
$57,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Average Selling Price 3-Year Residual Value
4-Year Average Residual
862,
082 902,
466
520,
518
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1997-2000
2003-2006
2008-2011
U.S. Class 8 Tractor Sales
16
Sources: Tractor values from Navistar from 2000-2010, 1990, 1995 and 2012E figures are BBTCM estimates; Class 8 tractor sales from A.C.T. Research. 1 st year D&A is approximately $38,000, meaning value is $85K after one year.
Val
ue A
fter
1
Yea
r
$87,000
Lots of late model used trucks in last 2 downturns; few now
Lots of late model used trucks in last 2 downturns; few now
Thom Albrecht804-787-8210
13% Shrinkage in Tractors 8-Years Old or Newer
• TL Fleet (8 years old or newer) has shrunk 14.4% or 231,380 units; 1.5% growth in 2011; 0.5% growth expected in 2012
• Fleet that is 15 years old or newer has shrunk 13% or 290,011 units; 0.9% shrinkage in 2011; 1.5% growth expected in 2012
• Tractor growth has been below GDP 8 of the last 10 years
• It has also been below Industrial Production most years
• Trucking is more cyclical than the broader economy
• Deregulation’s 20-year window of growth has run its course
• Freight grows slower than GDP growth most years
1.8
1.9
2.0
2.1
2.2
2.3
2000 2002 2004 2006 2008 2010 2012E
-7%
-5%
-3%
-1%
1%
3%
5%
7%
Class 8 Tractors 15 Years Old or Newer Annual % Change
1.2
1.3
1.4
1.5
1.6
1.7
2000 2002 2004 2006 2008 2010 2012E
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Class 8 Tractors 8 Years Old or Newer Annual % Change
17
Sources: A.C.T. Research and BBTCM analysis. Population figures in millions. Photos: Express archives.
Thom Albrecht804-787-8210
Active Trailer Populations
Refrigerated Trailers Flatbed Trailers
18
Source: ACT Research; pictures from Ryder and JBT Photos
Thom Albrecht804-787-8210 19
Source: A.C.T. Research.
Trailers are Old; Also, Van Population has Shrunk 11%
5.2
5.9
5.0
5.5
6.0
6.5
1998 2001 2004 2007 2010
Reefer Vans
8.4
6.0
7.0
8.0
9.0
1998 2001 2004 2007 2010
Flatbed
Reefer Vans (Avg. Age)Population Avg. Age (Years)
1998 1,624,066 6.39
1999 1,719,548 6.24
2000 1,789,072 6.25
2001 1,769,968 6.60
2002 1,745,597 6.94
2003 1,742,881 7.13
2004 1,766,476 7.17
2005 1,795,595 7.17
2006 1,833,046 7.15
2007 1,832,113 7.28
2008 1,783,349 7.61
2009 1,691,274 8.11
2010 1,628,190 8.43
2011 1,618,368 8.40
2012E 1,622,361 8.23
Dry Vans
Flatbed (Avg. Age)
Thom Albrecht804-787-8210
Productivity Down, Rates up Modestly, Input Costs Up
0
25
50
75
100
125
150
175
200
225
1990 1995 2000 2005 2010
Annual Miles perTractor (Productivity)New Class 8 TractorPrice (Input Cost)Tractor/Trailer Price(Input Cost)Avg RPLM (Payment)
20
Sources: BBTCM analysis of a composite of carriers. Trailer tractor ratio was 1.7; 2.0; 2.5; 2.8 and 2.5, respectively. All 4 data figures began at 100.0 in 1990.
Cartoon: Transport Topics.
Thom Albrecht804-787-8210
Population Demographics are Lousy for Driver Recruiting
-1.2%
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
Female Population Growth (Aged 20-44)Male Population Growth (Aged 20-44)
• White males aged 35-54 have shrunk by 3M during the last decade• Van pay is typically under $0.40 a mile and annual pay averaged about $46,500 in 2010; will be about
$48,000 in 2011• Private not-for hire fleets have low turnover (<15%) and average $64,000 in annual driver pay• This implies TL for-hire pay needs to rise to $0.50 to $0.55 per mile• CSA and lousy demographics are steep headwinds
22
Sources: U.S. Census Bureau. Unemployment is from the Bureau of Labor Statistics (BLS). BBTCM analysis below. Picture: BBTCM and FSA, circa 2005.
-1%
0%
1%
2%
3%
2004
2006
2008
2010
2012
2014
2016
2018
2020
Males & Females, Ages 20-60 Males & Females, Ages 45-60
Thom Albrecht804-787-8210
Driver Turnover is Rising Even With a Modest Housing Recovery—Could get Really Difficult when Housing Gets Strong
83%
0
500
1,000
1,500
2,000
2,500
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
E
20%
40%
60%
80%
100%
120%
140%
Housing Starts Driver Turnover
94%
39%
127%136%
20%
40%
60%
80%
100%
120%
140%
160%
00:Q
1
00:Q
4
01:Q
3
02:Q
2
03:Q
1
03:Q
4
04:Q
3
05:Q
2
06:Q
1
06:Q
4
07:Q
3
08:Q
2
09:Q
1
09:Q
4
10:Q
3
11:Q
2
12:Q
1
2%
4%
6%
8%
10%
12%
Driver Turnover Unemployment Rate
• If HOS (hours of service) is trimmed (2013?) and housing keeps modestly improving, then the stage could be set for a very challenging driver and capacity market in 2013; 2014 similar to 2004 and 1994?
• Each housing start generates about 8 TL loads• Once housing begins to recover it could rise for 8-10 straight years• Housing starts of 800K-850K in 2013 and 950+K in 2014 could do far more damage to driver availability
than all those years when housing starts were above 1.5M
23
Sources: U.S. Census Bureau on left; ATA TRAC Report on right, which reflects large TL fleet (above $30M of revenue) annualized driver turnover. Unemployment is from the Bureau of Labor Statistics (BLS). BBTCM analysis below and 2Q12E of 94%.
Thom Albrecht804-787-8210
Annual Change in Construction Jobs (000s)-Negative Implications for Truck Drivers-But Why is Hiring Down in 2012?
Year Total Construction
Jobs
ResidentialConstruction
Jobs
Non-Residential
Jobs
2002 -85 88 -173
2003 127 161 -34
2004 290 230 60
2005 416 268 148
2006 152 -62 214
2007 -198 -273 75
2008 -787 -510 -277
2009 -1053 -431 -622
2010 -149 -113 -36
2011 46 20 26
2012YTD
-30 -9 -21
24
Source: Bureau of Labor Statistics, May 2012 report
Thom Albrecht804-787-8210
Why Drivers Leave Their Jobs
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other
Have Not Lef t A Trucking Job
They Were Running Me Too Hard
I Just Wanted To Make A Change
Didn't Get The Right Loads, Or Enough Loads
Didn't Get Home Enough
Lack Of Recognition & Respect
Pay
28.8%
16.5%
7.3%
13.8%
22.3%
18.3%
29.8%
38.0%
28.0%
15.9%
9.4%
10.4%
18.4%
23.8%
34.1%
42.9%
Source: Newport Communications and Heavy Duty Trucking magazine survey of 4,000+ drivers.
Why Did You Leave Your Last Trucking Job?
Owner-Operator Company Driver
25
Thom Albrecht804-787-8210
JBHT is Driving Intermodal Conversion
26
46%
38%
26%
12%
20%
26%30%
26%23%
28%32% 31%
35%
28%
10%
15%
20%
25%
30%
35%
40%
45%
50%
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
JBI Eastern Intermodal Load Growth
JBI Eastern Load Growth-6%
-13%-14%-10%
5%
14%18% 19%
17%
11%8%
0%
-5%
8%
-25%-20%-15%-10%
-5%0%5%
10%15%20%
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
CSX Intermodal Load Growth
CSX Total Intermodal Load Growth CSX Domestic Intermodal Load GrowthSources: Company reports.
-5%
-18%-20%-19%
-9%
12%
20% 19%
13% 10% 9% 8% 11%5%
-25%
-15%
-5%
5%
15%
25%
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
NSC Intermodal Load Growth
NSC Intermodal Load Growth
Thom Albrecht804-787-8210
What Can You as a Carrier Do?• Develop a smart network• New TL pricing model: charge a rate per hour for your assets• How much time does it take to service your customer and
what are the assets involved?• Consider tiering driver pay, with 3 to 5 tiers• Analyze how and when customers can tender loads (48 hrs, 7
days, etc.?)• Analyze how quickly loads are accepted and why? Is your
approach fresh or a tradition?• What is your average profit per load? $50, $60…$100? Do
do you even know?• Let’s explore the network concept…
27
Thom Albrecht804-787-8210
Is Your Network the Equivalent of a Rotary Phone or “Dumb Phone”? Or…
28
• Is it a head-haul or backhaul lane?
• What is the market rate?• That’s what I’ll
charge…
• Incorporates revenue per mile
• Length of Haul• Maybe part of the
weekly computation of revenue per truck
• But lacking data on efficiency of loads…
Thom Albrecht804-787-8210
Or is Your Network More Like a Smart Phone?
• Loading and unloading info• Reefer run time; was product loaded
warm?• Cargo thefts-likely truck stops• Lock-down fuel card network
• How many hours before pick-up did reefer run & after delivery?
• Next load options if you accept current load
• Next load backhaul or head-haul?• Impact on driver HOS & network
both today & in 48 hours• Ability to rate loads ‘1’ to ’10’?
29
• How data intensive is your information about every lane, account, location?
• Dwell time at that location?• Accessorial payment history?
[Impacts ability to pay layover, detention to driver, etc.]
• Driver turnover @ that spot?• Probability of a better load in 4
hours?• Data on high, low and average
market rates• Toll info & contracts (22/100)• Loading & unloading info• Average, surge and seasonal info
Thom Albrecht804-787-8210
Truck Tonnage (Seasonally
Adjusted Index)
Total TL Loads (Not Seasonally Adjusted Index)
Wards N.A. Car & Truck Production
(In Millions)Housing Starts (In Thousands)
1999 105.5 102.8 17.6 1,640.9
2000 100.0 (-5.2%) 100.0 (-2.7%) 17.7 1,568.7
2001 99.5 (-0.5%) 106.0 (+6%) 15.8 1,602.7
2002 103.6 (+4.1%) 111.1 (+4.8%) 16.7 1,704.9
2003 106.7 (+3.0%) 111.6 (+0.5%) 16.2 1,847.7
2004 112.9 (+5.8%) 109.7 (-1.7%) 16.2 1,955.8
2005 115.7 (+2.5%) 109.2 (-0.5%) 16.3 2,068.3
2006 113.6 (-1.8%) 109.3 (0%) 15.9 1,800.9
2007 112.1 (-1.3%) 110.0 (+0.6%) 15.4 1,355.0
2008 113.3 (+1.1%) 110.9 (+0.8%) 12.9 905.5
2009 103.4 (-8.7%) 94.4 (-14.9%) 8.76 (-32.1%) 554.0
2010 109.4 (+5.8%) 99.0 (+4.9%) 12.15 (+38.7%) 586.9
2011 115.9 (+5.9%) 102.5 (+3.5%) 13.46 (+10.8%) 606.9
2012E ~3% to 4% growth ~2% to 3% growth ~14.8 to 15.2M ~680-700
31
Truck Tonnage & Loads Versus Auto & Housing; Incremental Changes More Adverse to Drivers & Capacity this Cycle
Sources: ATA for tonnage and loads; www.wardsauto.com for autos; U.S. Census Bureau for housing. Auto sales through December were 12.7M units up from 11.6M in 2010.
Thom Albrecht804-787-8210
Dry Van Loads (“NSA” Yr/ Yr
%Δ)
Flatbed Loads (“NSA”; Yr/ Yr
%Δ)
Refrigerated Loads (“NSA”;
Yr/ Yr %Δ)
LTL Shipments (not tonnage)
(“NSA Yr/Yr %Δ)
1999 7.9% 17.4% 10.2%
2000 (0.6%) 9.1% 7.2%
2001 8.2% 3.6% 0.0% (10.8%)
2002 6.7% 0.2% (1.1%) (2.2%)
2003 (1.2%) 7.5% (11.0%) 4.2%
2004 (3.7%) 4.5% 5.0% 9.9%
2005 (1.3%) 5.2% 1.5% 6.6%
2006 (0.3%) (0.7%) 7.7% 2.9%
2007 1.0% (5.2%) 6.6% (2.8%)
2008 (2.7%) (9.5%) 7.6% 1.6%
2009 (15.0%) (20.7%) 3.1% (21.7%)
2010 1.4% 3.9% 2.6% (4.0%)
2011 (3.0%) (1.5%) (4.4%) 12.0%
2012 YTD 1.7% 6.7% (0.5%) 5.6%
32
Trucking Segment Shipment Trends
Source: ATA May 2012 TRAC report.
Thom Albrecht804-787-8210
Canary in the Coal Mine? Which 4-Letter Word-Lull or Slow?
• Chemical rail carloadings: down 19 of the last 23 weeks (US & Canadian Rails)
• Cass: May shipments up 2.2% yr/yr; up 1.8% sequentially
• Loans: credit cards (+2.6%) and consumer loans (+4.5%) up noticeably last 2 months
• CLOs (pools of junk bonds) remain positive yr/yr
• Oh, and gas prices…
33
Chemical Carloadings
Sources: AAR and Cass.
-15%
-10%
-5%
0%
5%
10%
52
W 2
01
1
1 W
20
12
2 W
20
12
3 W
20
12
4 W
20
12
5 W
20
12
6 W
20
12
7 W
20
12
8 W
20
12
9 W
20
12
10
W 2
01
2
11
W 2
01
2
12
W 2
01
2
13
W 2
01
2
14
W 2
01
2
15
W 2
01
2
16
W 2
01
2
17
W 2
01
2
18
W 2
01
2
19
W 2
01
2
20
W 2
01
2
21
W 2
01
2
22
W 2
01
2
-1%
-13%
-1%
-3%-4%
7%
-2%-2%
-7%
-1%
-5%-5%-5%
-9%
-7%
6% 6%
0%
2%
-2%-2%
-6%-7%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
NSA Tonnage Shipments
NS
A T
on
na
ge
Sh
ipm
en
ts
SA
To
nn
ag
e
Ca
ss F
reig
ht S
hip
me
nts
NS
A T
on
na
ge
Ca
ss F
reig
ht S
hip
me
nts
Cass Freight Shipments VS Non-Seasonally Adjusted Tonnage
Thom Albrecht804-787-8210
Gas Prices as a Percentage of Disposable Income
In May gas prices averaged 4.06% of disposable incomeThe all-time high was 4.92% in July 2008Historically, 4% has led to a deceleration in tonnage and consumer spending“Wiggle room” today includes some job growth, more fuel efficient vehicles (63% vs. 48%), Internet shopping and fewer miles drivenOur sense? At 4.2% to 4.3% it gets worrisome
34
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
1%
2%
3%
4%
5%
6%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Reta
il Gas
Pric
es ($
Per G
allon
)
Fuel
Expe
nditu
res a
s % of
Disp
osab
le In
com
e
Gas Expenditures as % of Disposable Personal Income
U.S. Regular All Formulations Retail Gasoline Prices (Dollars per Gallon)
Sources: U.S. government economics departments of BEA and EIA. Commentary: BBTCM analysis.
Thom Albrecht804-787-8210
Disclosures
35
IMPORTANT DISCLOSURES Price Chart To receive price charts on the companies mentioned in this report, please contact BB&T Capital Markets Research at 800-552-7757 x8785. BB&T Capital Markets rating distribution by percentage (as of March 31, 2012):
All companies under coverage:
All companies under coverage to which it has provided investment banking services in the previous 12 months:
Buy (1) 53.0% Buy (1) 11.5% Hold (2) 46.0% Hold (2) 3.5% Underweight/Sell (3) 1.0% Underweight/Sell (3) 0.0% Not Rated (NR) 0.0% Not Rated (NR) 0.0% Suspended (SP) 0.0% Suspended (SP) 0.0% BB&T Capital Markets Ratings System: The BBTCM Equity Research Department Stock Rating System consists of three separate ratings. The appropriate rating is determined by a stock’s estimated 12-month total return potential, which consists of the percentage price change to the 12-month price target and the current yield on anticipated dividends. A 12-month price target is the analyst’s best estimate of the market price of the stock in 12 months. A 12-month price target is highly subjective and the result of numerous assumptions, including company, industry, and market fundamentals, both on an absolute and relative basis, as well as investor sentiment, which can be highly volatile. The definition of each rating is as follows: Buy (1): estimated total return potential greater than or equal to 10% Hold (2): estimated total return potential greater than or equal to 0% and less than 10% Underweight (3): estimated total return potential less than 0% NR: Not Rated NA: Not Applicable NM: Not Meaningful SP: Suspended Stocks rated Buy (1) are required to have a published 12-month price target, while it is not required on stocks rated Hold (2) and Underweight (3).
Thom Albrecht804-787-8210 36
BB&T Capital Markets Equity Research Disclosures as of June 8, 2012 COMPANY DISCLOSURE Arkansas Best Corporation (ABFS) 1, 6, 9 C.H. Robinson Worldwide, Inc. (CHRW) 1, 6 Celadon Group, Inc. (CGI) 1, 6, 8 Con-way Incorporated (CNW) 1, 6 Covenant Transportation Group, Inc. (CVTI) 1, 6 Heartland Express, Inc. (HTLD) 1, 6 J.B. Hunt Transport Services, Inc. (JBHT) 1, 6, 9 Knight Transportation, Inc. (KNX) 1, 6 Landstar System, Inc. (LSTR) 1, 6, 9 Marten Transport, Ltd. (MRTN) 1, 6 Old Dominion Freight Line, Inc. (ODFL) 1, 6, 9 Roadrunner Transportation Systems, Inc. (RRTS) 1, 6, 9 Rush Enterprises, Inc. (RUSHA) 1, 6 Saia, Inc. (SAIA) 1, 6 Swift Transportation Co., Inc. (SWFT) 1, 6, 9 USA Truck, Inc. (USAK) 1, 6, 9 Universal Truckload Services, Inc. (UACL) 1, 6, 8 Vitran Corporation Inc. (VTNC) 1, 6 Wabash National Corporation (WNC) 1, 6 YRC Worldwide Inc. (YRCW) 1, 6
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST BB&T Capital Markets Equity Research Disclosure Legend 1. BB&T Capital Markets makes a market in the securities of the subject company. 2. The analyst or a member of the analyst's household serves as an officer, director, or advisory board member of
the subject company. 3. The analyst or a member of the analyst's household owns shares of the subject company. 4. BB&T Capital Markets has managed or co-managed a public offering of securities for the subject company in the
last 12 months. 5. BB&T Capital Markets has received compensation for investment banking services from the subject company in
the last 12 months. 6. BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from
the subject company in the next three months. 7. BB&T Capital Markets or its affiliates beneficially own 1% or more of the common stock of the subject company as
calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934. 8. The subject company is, or during the past 12 months was, a client of BB&T Capital Markets, which provided non-
investment banking, securities-related services to, and received compensation from, the subject company for such services. The analyst or employees of BB&T Capital Markets with the ability to influence the substance of this report knows the foregoing facts.
9. An affiliate of BB&T Capital Markets received compensation from the subject company for products or services other than investment banking services during the past 12 months. The analyst or employees of BB&T Capital Markets with the ability to influence the substance of this report know or have reason to know the foregoing facts.
For valuation methodology and related risk factors on Buy (1)–rated stocks, please refer to the body text of this report or to individual reports on any covered companies referenced in this report. The analyst(s) principally responsible for preparation of this report received compensation that is based upon many factors, including the firm’s overall investment banking revenue.
Thom Albrecht804-787-8210 37
Analyst Certification The analyst(s) principally responsible for the preparation of this research report certify that the views expressed in this research report accurately reflect his/her (their) personal views about the subject security(ies) or issuer(s) and that his/her (their) compensation was not, is not, or will not be directly or indirectly related to the specific recommendations or views contained in this research report. OTHER DISCLOSURES The information and statistics in this report have been obtained from sources we believe are reliable but we do not warrant their accuracy or completeness. We do not undertake to advise the reader as to changes in figures or our views. This is not a solicitation of an order to buy or sell any securities. BB&T Capital Markets is a division of Scott & Stringfellow, LLC, a registered broker/dealer subsidiary of BB&T Corporation. Member FINRA/SIPC. NOT A DEPOSIT, NOT FDIC INSURED, NOT GUARANTEED BY THE BANK, NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY AND MAY GO DOWN IN VALUE. The opinions expressed are those of the analyst(s) and not those of BB&T Corporation or its executives. Important Information Regarding the Distribution of this Report in the United Kingdom THIS REPORT HAS BEEN PRODUCED BY BB&T CAPITAL MARKETS AND IS BEING DISTRIBUTED IN THE UNITED KINGDOM (UK) BY SEYMOUR PIERCE LIMITED (SPL). SPL IS AUTHORIZED AND REGULATED IN THE UK BY THE FINANCIAL SERVICES AUTHORITY TO CARRY OUT BOTH CORPORATE FINANCE AND INVESTMENT SERVICES AND IS A MEMBER OF THE LONDON STOCK EXCHANGE. ALTHOUGH BB&T CAPITAL MARKETS IS UNDER SEPARATE OWNERSHIP FROM SPL, BB&T CAPITAL MARKETS HAS APPOINTED SPL AS ITS EXCLUSIVE DISTRIBUTOR OF THIS RESEARCH IN THE UK, AND BB&T CAPITAL MARKETS WILL BE REMUNERATED BY SPL BY WAY OF A FEE. THIS REPORT HAS NOT BEEN APPROVED FOR PURPOSES OF SECTION 21 OF THE UK'S FINANCIAL SERVICES AND MARKETS ACT 2000, AND ACCORDINGLY IS ONLY PROVIDED IN THE UK FOR THE USE OF PERSONS TO WHOM COMMUNICATIONS CAN BE MADE WITHOUT BEING SO APPROVED, AS DETAILED IN THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005.
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