1

Is the Capacity Tipping Point Finally Here?

“A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.”-Winston Churchill

Agenda:Why Did It Not Feel Better in 2012-2013?

What Happened Since November?Freight Data-Just the Facts, Ma’am

Economy: Points to PonderCapacity: Hither and Thither?

Photos from BB&TCM

2

The Numbers Say it was Better, but in Trucking it Didn’t Feel that Way

Source: BB&TCM analysis; cartoon from ATA.

2011• Auto prod. at 13.4M units• Housing starts at 609K• Unemployment of ~8.5%• Truck tonnage rose 5.8%; total

TL shipments rose 3.5%; van loads fell 3.0%

2013• Auto prod. @ 16.6+M units (+4% yoy)

• Housing starts at ~923.4K units• Unemployment Finished @ 6.7%; • 70+% of new jobs are part-time• Truck tonnage is up ~8.6% since

’11; total TL shipments up 2.4%; van loads flat

What’s Going On?

3

Why? IP Slumped, Lots of Other Issues…

Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP.

When IP grows below 3%, freight gets sloppy

E-Commerce Supply chain & packaging

changes Product size changes Optimization of

everything from the network to the trailer reduced shipment counts

Intermodal… Much rooted in the “great

recession” and high fuel prices of 2008 and resulted in…

5.7%

3.4% 3.6%

2.6%

5.4%

2.9%

0.3%

2.5%

4.1%

1.2%

2.5%

4.8%4.4%

2.5%1.8%

2.8%

1.9%

3.7%

1.2%

2.8%

0.1%

1.1%

2.5%

4.1%

2.6%

-1.0%-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2010 2011 2012 2013 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14

GDP vs Industrial Production (yr/yr % change)

IP GDP

4

Example: Van Shrank (Decay); Reefer (Growth)…

Sources: BB&TCM analysis of ATA data. Commentary is BB&TCM.

Dry van loads are in decay despite successes in dedicated, cross-border, DSD, etc.

The 4 best years ever for van TL pricing and profits, 2003-2006, saw loads shrink each year

Van load changes: 2003 (-1.2%), 2004 (-3.3%), 2005 (-1.3%) and 2006 (-0.3%)

2003-2006 were special only because supply was tight and HOS complicated things

In the last 10 years reefer loads have declined one year (2011 @ -4.4%), while van loads have grown three times (2007 @ 1.0%, 2010 at 1.4% 2013 @ 1.1%)

Reefer’s annual acceleration reflects an active FDA, aging population demographics, focus on fresh foods, etc.

1993-2002 2007-2012 2013-20%0%

20%40%60%80%

76.7%

-19.8%

+1.1%

Dry Van Load Growth

1993-2005 2006-2012 20130%

5%

10%

15%

20% 16.7% 17.3%

2.5%

Refrigerated Load Growth

CAGR:1993-2002: 6.5%2007-2013: -3.1%

CAGR:1993-2005: 1.29%2007-2013: 2.1%

5

Don’t Underestimate Intermodal’s Momentum vis-à-vis Trucking

Source: BB&TCM; ATA and IANA data in chart

Domestic intermodal has posted load growth 12 straight years, including 2009

Van TL loads have contracted 8 of the past 12 years, including 3 of last 5 years

Van loads are ~18% below 2007 levels

Domestic container growth has averaged 9.2% annual growth since 2007 (versus GDP growth of ~1.8%)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Q1'

14

-15%

-10%

-5%

0%

5%

10%

15%

7.0%5.3%

3.9%

0.2%

4.8%

9.3%

7.0%

2.9%

13.5%

9.6%

12.2%

9.4%

3.2%

6.7%

-1.2%

-3.7%

-1.3%-0.3%

1.0%

-2.7%

-15.0%

1.4%

-3.0%-1.4%

1.1% 1.1%

Domestic Containers Dry Van Loads

6

Other Influences—Friendly to Supply Chains, but Not to Truckers

Source: BB&TCM; backhaul figures from ACT Research ; JBI LOH data from J.B. Hunt

TMS Systems Packaging Revolution The growth of intermodal highway

conversion in the East (see JBI chart on right)

On-line shopping growth, creating more parcel, LTL and less TL (proportionate to LTL & parcel)

Aggressive effort to lower deadhead by private in-house fleets (down 8 points in 6 years); this has created 2 points of truck capacity

Broader supply chain changes

JBI LOH Has Shrunk ~ 15% Private Fleet Backhaul %

15%

20%

25%

30%

35%30%

28% 27%25%

23%21% 22%

2006 2007 2008 2009 2010 2011 2012

1,954

1,918 1,913

1,914

1,879

1,844

1,817

1,831

1,798 1,784

1,795

1,806

1,788

1,761 1,777

1,782

1,741

1,714 1,723

1,726

1,704 1,687

1,697

1,720

1,691

1,688

1,693

1,703

1,669

1,6251,6501,6751,7001,7251,7501,7751,8001,8251,8501,8751,9001,9251,9501,975

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

Q10

9

Q20

9

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

JBI-Average Length of Haul

7

Costs and Mileage Trends–Not Like the 1990s

Source: BB&TCM estimates; ATA Atri division

Carrier costs per mile (excluding fuel expenses) have risen 12.9% since 2008

Numerous fleets have bought used tractors and trailers to offset the higher costs of new equipment

Annual cost inflation has averaged 3.1%

However, driver wages fell in 2009 and were flat in 2010

Driver pay and benefits could be entering a highly inflationary period

Carrier Costs per Mile (Excluding Fuel)$0.95$1.00$1.05$1.10$1.15$1.20

$1.020$1.046 $1.062

$1.116$1.152

2008 2009 2010 2011 2012

2007 2008 2009 2010 2011 2012 20135,000

7,500

10,000

12,500 10,946

8,9267,604

8,250 8,080 7,752 7,757

Monthly Miles per Truck

8

What Happened the Last Few Months?

Source: BB&TCM

Weather1) Networks out

of kilter2) Killed older

capacity

HOS: 3% Hit

IP Accelerated

Easy Comps

May/June: port strike fears

Rail Service meltdown: ~150,000 loads left rails first 11 weeks of 2014

Will July-September be their usual “mediocre”?

9

Easy Comps or a Better Economy? Van (top) & Reefer Clues

Sources: BB&TCM commentary; ATA for load data

• Dry van load growth picked up last 5months of 2013

• Van loads grew 3.9% last 5 months of 2013 versus (3.7%) shrinkage in 2012

• Was it a real pick-up? • Or easy comps given the fiscal

cliff worries of 2012 and European debt worries of 2011?

• IP did grow 4.8% in Q4’13, but it too had an easy comp

• Jan ’14 (-0.37%), Feb ’14 (+1.38%) and Mar (+2.24%) were nothing special

• Reefer: easy comps 3 of last 4 months in 2013

Aug Sept Oct Nov Dec-10%

-5%

0%

5%

10%

-2.5%

-8.5%

2.4%

-1.3%

-8.4%

1.6%

7.0%2.6% 2.3%

6.2%

2011 2012 2013

Aug Sept Oct Nov Dec-4%-2%0%2%4%6%8%

1.8%

-1.7%

4.1%1.8%

-2.8%

2.7%0.5%

1.5%

7.7%

2.7%

2011 2012 2013

10

LTL Shipments Saw the Same Year-End Bump

Sources: BB&TCM commentary and ATA for data

• LTL shipments (not tonnage) also benefitted from easy comps

• Last 5 months of 2011 saw double-digit growth

• Only “strength on “strength” comp was Oct at +6% vs. +8.5% in Oct ’12

• Jan ’14 (+2.1%) and Feb’14 (+5.0%)

Aug Sept Oct Nov Dec-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

1.8%

-8.4%

8.5%

1.5%

-7.1%

-0.4%

10.2%

6.0%

0.1%

13.7%2012 2013

11

On-Line Sales: The “Wild and Crazy Guy” for all Q4s?

Sources: US Census Bureau for e-Commerce figures. Note: Talbots is a private company.

Has grown 15.6% annually since 2009 “great recession”

E-Commerce accelerated in 2013 as mobile apps improved

On a steady path to at least 10% to 12% of mix eventually

Amazon is to logistics what Walmart was in the 1980s-2000s

Omni-channel approach so important

Modest shipping charges won’t change habits (Talbots example)

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

1%2%3%4%5%6%7%8%9%

0.9% 1.1% 1.4%1.8% 2.1%

2.5%3.0%

3.5% 3.6%4.0%

4.4% 4.7%5.2%

6.5%E-Commerce: % of Retail Sales

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

$0

$50

$100

$150

$200

$250

$300

$28 $35 $45 $58$74

$93$115

$138$142$145$169

$195$226

$259On-Line Sales ($Bil)

12

Q4’13: Retail’s Impact on Freight-This May be the ‘New Normal’

Sources: US Commerce Department, US Census Bureau; BB&TCM channel checks; photos from BB&TCM

• Store foot traffic is off 54% the last 3 years!!!!

• The last 5 weeks of 2013 saw foot traffic fall 12.8%, but brick & mortar retail sales rose 2.7%

• Online sales were 6.2% of retail in 1st 9 months of 2013; then 14% last 5 weeks of 2013

• Q4’13 zaniness not just a function of a late Thanksgiving and a Wednesday Christmas

13

Is Recent Tight Capacity Merely a Re-dux of 1H’2010?

Source: BB&TCM analysis; cartoon from ATA.

1H’10• Awful weather in Feb/March• Load acceptance fell• Truck availability difficult• Spot market spiked Feb-June• “Next capacity crunch” declared by

carriers• But CSA, HOS, CARB, etc., were non-

existent or different• By mid-July it was ‘over’ for 3+ years

Late ‘13-early ‘14• Weather stunk; spot soared• HOS started slow, but took a bite by

fall 2013• Actual & pending regs will continue to

grow, i.e., “creeping capacity crunch”• Unlikely to go back to looseness of

2012-2013 but not yet a huge crunch

14

Freight Data-Just the Facts, Ma’am

15

Shipments: LTL & Tank Remain the Stars

Source: ATA TRAC report

2011 2012 2013 2014YTD 2014 April

-5%

0%

5%

10%

15%

3.5%

1.1% 1.3% 0.9%

4.4%

-3.0%-1.4%

1.1% 1.6%3.0%

-1.5%

6.1%

1.1%

-3.5%-1.7%

-4.4%

1.1%2.5%

-0.1%

5.1%

12.0%

2.7%1.4%

5.9%7.0%

14.9%

5.8%6.6%

1.4%

6.6%

Total Loads Van Flatbed Reefer LTL Tank

16

Now Reefer is Really Smoking (pun intended)!

Sources: BB&TCM commentary; ATA for load data; ACT Research for reefer trailers

• Since the end of 2006 reefer loads have grown 20.3% but trailers are up just 3.4%

• Reefer loads have grown 9 of the last 10 years

• Reefer loads have averaged 3.3% annual growth since the end of 2003

2006 2007 2008 2009 2010 2011 2012 201380

90

100

110

120

130

140

-6%-4%-2%0%2%4%6%8%10%

7.7%6.6%

7.6%

3.1% 2.6%

-4.4%

1.1%2.5%

2006 2007 2008 2009 2010 2011 2012 2013 330,000

335,000

340,000

345,000

350,000

355,000

339,189 337,537

350,592

Reefer Trailers Have Grown 3.4% in 7 Years

Reefer Loads Up 20% Since ‘06

17

Flatbed Capacity: Thankfully Energy & Auto (Steel) Have Been Good

Sources: BB&TCM commentary; ATA for load data; ACT Research for reefer trailers

• Flatbed trailers are off 8.3% from their ’07 peak

• Flatbed loads have grown 9.7% since the ’09 trough

• However, flatbed loads remain 25% below the last peak as the negatives of sluggish construction outweigh the positives of energy

2006 2007 2008 2009 2010 2011 2012 2013 250,000 260,000 270,000 280,000 290,000 300,000 310,000

298,166

274,192 277,836

Flatbed Trailers Have Fallen 6.8% in 7 Years

2006 2007 2008 2009 2010 2011 2012 201380

90

100

110

120

130

140

-25%-20%-15%-10%-5%0%5%10%

-0.7%-5.2%

-9.5%

-20.7%

3.9%

-1.5%

6.1%1.1%

Flatbed Loads

18

Since 2011 Construction has Hired 543,000 Workers—Up to 130,000 were ex-Truck Drivers

Source: BLS, June 2014 report for left table; ATA TRAC report for driver turnover; BLS for unemployment; US Census Bureau for housing starts

Year Total ConstructionJobs (000s)

ResidentialConstructionJobs (000s)

Non-Resid. Jobs

(000s)

2002 -85 88 -173

2003 127 161 -34

2004 290 230 60

2005 416 268 148

2006 152 -62 214

2007 -195 -271 76

2008 -789 -515 -274

2009 -1,047 -428 -619

2010 -192 -131 -61

2011 144 50 94

2012 114 58 56

2013 156 116 40

2014YTD 124 31 98

98%99%

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

2013

20%

40%

60%

80%

100%

120%

140%

Housing Starts Driver Turnover

99%

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

12:Q

4

13:Q

3 2%

4%

6%

8%

10%

12%

Driver Turnover Unemployment Rate

Construction hiring picked a bit in 2013, with further acceleration in 2014Lots of cash payments in 2012 and absorption of late ‘11-early ‘12 hiringDrivers are targeted for hiring

19

Domestic Intermodal: Gonna Take Another 15% Bite out of LH TL

Source: BB&TCM; JB Hunt for intermodal chart

Long-haul trucking remains very vulnerable to rail intermodal

Truckload market greater than 700 miles is a $40B market

Intermodal is a $14B market Intermodal should be at $20B by

2019–2020 At least 15% of the long-haul

(over 700 miles) TL market will vanish

ACT Research estimates that every 1M intermodal loads reduces the Class 8 tractor population need by 10,000

46%

38%

26%

12%

20%

26%30%

26%23%

28%32%31%

35%

28%

21%22%

15%19%

14%14%17%

9%

5%10%15%20%25%30%35%40%45%50%

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

JBI Eastern Intermodal Load Growth

JBI Eastern Load Growth

20

The Economy: Points to Ponder

21

Private Economy GDP Growth is “Ok”

Source: Bureau of Economic Analysis for GDP; Private economy GDP is exclusive of all government spending (federal, state and local); commentary is BB&TCM

IP has accelerated recently, a good thing

But until job creation consistently tracks/exceeds 250,000 a month, the economy will remain “solidly mediocre”

Rising interest rates will foster more loan growth, not stifle growth

Bank spreads remain very narrow

0.25%

1.11%

2.96%

4.38% 4.05%

2.95%

1.84%

(1.03%)

(4.31%)

3.17% 3.18% 3.71%

2.84%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Private Sector Growth

22

…2 Key Freight Drivers Have “Leveled Off”

Sources: BB&TCM commentary, US Census Bureau (housing) and Bloomberg (auto production). Housing in 000s; autos in millions.

• Housing starts are up 52% since 2011, but permits have stalled since April ’13

• Permits are not impacted by weather like housing starts

• Auto production is up 89% since 2009 low and 24% since 2011 but is beginning to level off; 2% to 4% unit growth

• More robust job and income growth will be required for materially greater improvements

• Rising interest rates probably slowed housing some

• 70+% of all new jobs last 2 years are part-time versus a longer-term average of 53%

• How quickly will housing get back to 1.5M units?

20112013

May JulySe

ptNov Jan

Mar0

200 400 600 800

1,000 1,200

624

1,005 1,008

Housing Permits

2014E

2012

2010

0 2 4 6 8 10 12 14 16 1816.8

16.6

15.9

13.4

11.9

8.8

N.A. Auto Production

23

Chemicals: Quietly Signaling Strength

Sources: Association of American Railroads (AAR), Bloomberg and BB&TCM commentary.

• Chemical carloads on the railroads are encouraging

• 22 weeks so far• While 13 are down (vs. 16 down weeks

in all of 2013), much of that was weather

• Chemical shipments have been up 7 of the last 10 weeks

• Chemical carloadings are a proxy for industrial activity

• In the next 3 years over 120 new chemical, fertilizer and petro-chem plants and expansions will come on line in the Gulf Coast, totaling more than $120 billion

-10%

-5%

0%

5%

10%

15%

20%

1 W3 W5 W7 W9 W11 W13 W15 W17 W19 W21 W23 W25 W27 W29 W31 W33 W35 W37 W39 W41 W43 W45 W47 W49 W51 W

4.70% 4.24%

7.66%

-3.65%

9.92%

-3.40%

8.18%7.26%

-6.34%

-4.02%

Yr/Yr % Change in US + Canadian Chemical Shipments Ex-Petroleum

2013 2014

0102030

405060

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

YTD

24

7

34

6

25

48

1119

6

36 32

6

5141

17

36

16 13

Figure 1: 2013 - Negative yr/yr change for chemical shipments ex-petrol

# Negative yr/yr Weeks

24

2013

2011

2009

2007

2005

2003

2001

1999

1997

0% 50% 100% 150% 200% 250% 300% 350%149%

188%308%

61%72%

85%120%

58%65%

37%107%

64%219%

53%82%

93%94%

43%

Household Formation Ratio to Housing Starts

Long-Term Positive: Household Formations are Running Way Above Housing Starts

Source: US Census Bureau and BB&TCM analysis

25

Lending: Bottoming and Growing Selectively

Source: Federal Reserve Board. C&I is commercial and industrial and RE is real estate

7.7%

-1.0%

3.5%

0.8%

-20% -10% 0% 10%

C&I loans

RE loans

Consumer

Credit cards

2013 2012 2011 2010 2009 0% 2% 4% 6%

C&I loans

RE loans

Consumer

Credit cards

5.2%

1.2%

2.6%

0.7%

Q1'14 Trends

26

Factoid: Today’s Youth are Different than Us

Sources: US Dept. of Transportation and BB&TCM analysis; photo from BB&TCM

• Only 40% of Millenials (born 1983-2001) believe it is important to own a vehicle compared to 60% for baby boomers (1946-1964)

• 87% of 19-year olds held a license in 1983; only 69% did in 2011

• Why? More comfortable with shared cars, bikes and public transit

• Affordability also an issue

• Will impact future freight

27

Capacity: Prolonged Crunch or Rolling Headaches in 2014-2016?

Source: BB&TCM/Thom Albrecht for cartoon on left; ATA for cartoon on right.

28

Capacity Crunch or Not?

Source: Commentary is BB&TCM analysis and opinions; photo is courtesy of BB&TCM

Bull Case• Van loads grew 6.2% in Dec ‘13• Increase in carrier failures in

Q3, Q4 and Q1 despite lower fuel prices and higher freight volumes

• Regulatory issues finally tightening the noose more than earlier supply chain changes

• Future regulation (ELDs, drug clearinghouse, etc.) to further constrict capacity

Bear Case• Dec’12 loads fell 8.4% (easy comp)• 70+% of jobs last 2 years are part-time;

labor participation rate very low• Housing starts: faltered in Q4 and Q1,

hurting GDP over 0.3% • Auto at 16.6M, up from 8.8M and unlikely

to exceed 17.5M• Changing retail season likely to create

chaos last 5-6 weeks each year, esp. e-Commerce

• WEATHER!• Our conclusion? 2014 is like 2003, not

2004…a transitional year…setting the stage for 2015-2016, which could be highly inflationary for shippers

29

Tractor Shrinkage Was Close to Shipment Shrinkage by Late 2013

Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP.

There are 1.3M CL8 trucks 8 years old or newer

2.23M CL8 trucks 15 years old or newer

We estimate that 70% to 75% of inter-city freight is hauled by trucks 8 years old or newer

Little is hauled by 14 & 15 year old trucks

But some is hauled by 9-12 year old trucks

Weighting it 70/30 implies the OTR fleet was down ~16.5%, implying slight excess capacity (1% to 2%) last fall and then…

all heck broke loose…

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

3,000

8 Yrs Old or Newer 15 Yrs Old orNewer

Van Shipments

2006

2013

-18.1%

-11.7%

-18.9%

Tractor Shrinkage versus Dry Van Shipments

30

Why Drivers Leave Their Jobs (Pay & Respect)—It’s a Shipper Problem not Just a Carrier Problem

Source: BB&TCM (analysis and survey); comments on right from BB&TCM; cartoon from ATA.

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: BBTCM analysis and survey.

Why Did You Leave Your Last Trucking Job?

Owner-Operator Company Driver

Does the shipper value a driver’s time?Bathrooms, phonesWifi availabilityHelpful staffParking availabilityClear signsPaper work handled courteously & simply3rd Parties @ Gate-Do they share your view?3% rate hike-~1% goes to driver

31

Pay Rising but Woefully Inadequate

Source: BB&TCM estimates; ATA Atri division

Driver turnover in the 90s for 8 straight quarters

Turnover managed fairly well, but the pipeline of new drivers is weak

Pay needs to rise to attract new candidates to the industry

2013 median driver pay was $47,544, up 1.92% vs. 2012 but up just 3.3% since 2008

At $0.372 it has barely budged since $0.360 in 2008; inflation alone would be at $0.403

In real terms drivers have lost 2.25 cents 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$0.280

$0.300

$0.320

$0.340

$0.360

$0.380

$0.302$0.300

$0.334$0.341$0.341$0.341$0.341$0.343$0.346$0.347

$0.354

Refrigerated Per Mile Pay

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$0.280

$0.300

$0.320

$0.340

$0.360

$0.380

$0.312$0.312

$0.329

$0.360$0.360$0.349$0.345

$0.352$0.361$0.365

$0.372

Dry Van Per Mile Pay

32

Regulations, More than Demand, Will Drive the Next Crunch-But It’s Coming

Source: FTR Associates and BB&TCM analysis.

Tons of New Regulations1 Safety information and carrier ratings2 Special state regulations on trucking (ex: CARB)3 Opening the border to trucking4 Elimination or allowing of illegal aliens5 Variety of health regulations (apnea, medical certificates, etc.)6 Require ELDs or electronic logging devices7 Hours of service changes8 Increase broker bond & require prompt payment of carrier charges9 More stringent temperature and cleanliness requirements

10 Encourage union membership and require benefits for Ics11 Examination of fleets for patterns of violations12 Prevent shipper coercion regarding HOS, CSA, etc.13 National drug clearinghouse14 Requiring standard training procedures15 Test new carriers for proficiency16 Increase minimum insurance coverage for carriers17 Tightened OSHA requirements18 Hold shippers and brokers responsible for hired carriers' safety19 Limit max governed speed (64 MPH)20 New vehicle stability controls

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Implied Driver Hires Per Quarter Required By Regulation

Electronic Stability controls

Speed limiters

Safe Harbor

OSHA Worker Protection

Minimum Insurance

Entry Proficiency

Training Provisions Driver Effect

Drug & Alcohol Data Base

Prohibition Of Coercion

Pattern Of Violation

Employee Free Choice

Safe Food Transportation

33

And A Host of Miscellaneous Factors

Sources: ATA for loads; ACT Research for truck counts and BB&TCM analysis; photo from BB&TCM

HOS cut “functional capacity” by ~3% And empty trucks due to no drivers is

~4% (maybe more) Carrier failures have risen significantly

the last 9 months despite relatively muted fuel prices and a modest uptick in volumes

Fleets are failing as the cumulative impact of costs and the driver toll run their course

Older drivers leaving due to technology; younger drivers still not entering the driver force

ELDs will grow like a musical crescendo…

34

Driver Miles Equals Driver Smiles

Sources: BB&TCM proprietary work with a large private fleet, sub-90 OR

• Prep time=pre-trip inspection, fueling, drug tests, DOT inspections

• PT=breaks, meals, communications, route planning, logging

• Time at S/R=inefficient appointments, paperwork, check-in, check-out

• DTE=holidays, surges, traffic, day of week booking, network changes

• UT=appointment times, parking issues, fatigue, 70 hour rule, planning uncertainty, day of week bookings

• DT=Most fleets believe they can add 30 to 75 minutes with shipper/receiver help

3090

108

48

120

438 (7.3 hours)

A Driver's 14 Hour Day (840 minutes)

Prep Time

Personal Time

Time at Shipper/Re-ceiverDrive Time Empty

Unused Time

Drive Time

Note: 600 available drive time minutes per day

35

Shippers, Let’s Talk Strategy and “Big Picture”

Source: BB&TCM photo and commentary

• You are not buying transportation, you are buying capacity…make sure your bosses know the difference

• Don’t let trucking’s economies of scope mask its diseconomies of scale

• Many of you work for companies with a kaizen, continuous improvement or lean culture. The average trucker has 4 to 5 drivers for every non-driver. Given the government’s lack of productivity help, be careful about a “CI” mindset

36

• When President Obama took office in 2009, there was one person at DOT making over $170,000 annually

• Today, there are 1,800+ people at DOT making over $170,0000

• No wonder you have a headache!

Stat of the Day

Source: US Congress for DOT information; picture from BB&TCM.

37

IMPORTANT DISCLOSURES

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 June 12, 2014):All companies All companies under coverage to which it has providedunder coverage: investment banking services in the previous 12 months:Buy (1) 48.25% Buy (1) 26.09%Hold (2) 51.40% Hold (2) 14.29%Underweight/Sell (3) 0.35% Underweight/Sell (3) 0.00%Not Rated (NR) 0.00% Not Rated (NR) 0.00%

BB&T Capital Markets Ratings System:

The BB&T Capital Markets 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 thepercentage 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 targetis 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%B: Buy H: Hold UW: Underweight NR: Not Rated NA: Not Applicable NM: Not Meaningful SP: SuspendedStocks 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).

BB&T Capital Markets Equity Research Disclosures as of June 12, 2014

BB&T Capital Markets makes a market in the securities of ArcBest Corporation, Celadon Group, Inc., C. H. Robinson Worldwide, Inc., Con-way Incorporated, Covenant Transportation Group, Inc., Echo Global Logistics, Inc.,The Greenbrier Companies, Inc., Genesee & Wyoming Inc., Heartland Express, Inc., J.B. Hunt Transport Services, Inc., Knight Transportation, Inc., Landstar System, Inc., Marten Transport, Ltd., Old Dominion Freight Line, Inc.,Roadrunner Transportation Systems, Inc., Saia, Inc., Swift Transportation Company, Trinity Industries, Inc., Universal Truckload Services, Inc., Wabtec Corporation, Werner Enterprises, Inc. and YRC Worldwide Inc..BB&T Capital Markets has managed or co-managed a public offering of securities for Roadrunner Transportation Systems, Inc. and Wabtec Corporation in the last 12 months.BB&T Capital Markets has received compensation for investment banking services from Roadrunner Transportation Systems, Inc. and Wabtec Corporation in the last 12 months.BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from ArcBest Corporation, Celadon Group, Inc., C. H. Robinson Worldwide, Inc., Con-way Incorporated, CovenantTransportation Group, Inc., Echo Global Logistics, Inc., The Greenbrier Companies, Inc., Genesee & Wyoming Inc., Heartland Express, Inc., J.B. Hunt Transport Services, Inc., Knight Transportation, Inc., Landstar System, Inc.,Marten Transport, Ltd., Old Dominion Freight Line, Inc., Roadrunner Transportation Systems, Inc., Saia, Inc., Swift Transportation Company, Trinity Industries, Inc., Universal Truckload Services, Inc., Wabtec Corporation, WernerEnterprises, Inc. and YRC Worldwide Inc. in the next three months.An affiliate of BB&T Capital Markets received compensation from ArcBest Corporation, Con-way Incorporated, The Greenbrier Companies, Inc., Genesee & Wyoming Inc., J.B. Hunt Transport Services, Inc., Landstar System, Inc.,Old Dominion Freight Line, Inc., Roadrunner Transportation Systems, Inc., Saia, Inc., Swift Transportation Company, Trinity Industries, Inc. and Wabtec Corporation for products or services other than investment banking servicesduring 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.

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST

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.

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 DISCLOSURESThe 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 figuresor our views. This is not a solicitation of an order to buy or sell any securities.BB&T Capital Markets, a division of BB&T Securities, LLC, member FINRA/SIPC, is a wholly owned nonbank subsidiary of BB&T Corporation. The securities sold, offered or recommended are not a deposit, not FDIC insured, notguaranteed by a bank, not guaranteed 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.