2

How far is the fall when jumping from the basement window?

You can’t fall 20 feet from a 4-foot stepladder

Before We Get Started…A Few Thoughts

Cartoon from ATA

3

Short Duration Cyclicality, Similar to 1970s, Has Returned: Impacts Psyche & Planning & Vendor & Customer Relationships

Source: BB&TCM; GDP figures from Bureau of Economic Analysis (BEA)

0

10

20

30

40

50

60

70

80

04

126

Average Qtrs of Positive GDPStrong QtrsNegative QtrsWeak QtrsTotal Qtrs

Current environment is similar to highly cyclical 1970s environment

Short-duration cycles predominate with fewer “strong” quarters

Short duration also means fewer growth quarters between negative GDP periods

Recovery periods are shorter and not as strong

Strong quarters are defined as GDP growth ≥ 3%

Weak quarters are defined as GDP growth between 0% and 1.9%

1970s: 12 out of 52 quarters with negative GDP (23%); 20 with strong (38%); 8 with weak (15%); 10 quarters on average between negative GDP quarters

1983-2001: 48 out of 76 quarters with strong GDP (63%); only 4 negative quarters; average of 32 quarters between negative GDP quarters

4

Four Indicators: I’m Okay, You’re Okay

Source: Calculated Risk; ATA

Truck Tonnage: Up 39 of 42 months (NSA), but down 3 of 8 months

Private residential spending: 55% below ’06 peak, up 36% from low. Non-residential is 28% below ’08 peak, up 33% from low. Public construction is 20% below March ’09 peak.

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

150

Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13

Yr/Y

r % C

hang

e

NSA

Mon

thly

Ton

nage

1.4%

0%1%2%3%4%5%6%7%8%9%

10%

1996

Nov.

Sep. Jul.

May

Mar

.20

01No

v.Se

p. Jul.

May

Mar

.20

06No

v.Se

p. Jul.

May

Mar

.20

11No

v.Se

p.

N.A. Class 8 Tractor Backlog Cancellation Rate

Cancel Percent Backlog

1997-1999 Average: 2.2%2004-2006 Average: 1.4%2011 Average: 1.7%2012 Average: 2.1%

0.9%

0%

2%

4%

6%

8%

10%

12%

1996

Nov.

Sep. Jul.

May

Mar

.20

01No

v.Se

p. Jul.

May

Mar

.20

06No

v.Se

p.Ju

lyM

ayM

ar.

2011

Nov.

Sep.

Total Trailer - Cancel Percent Backlog

Cancel Percent Backlog

1997-1999 Average: 2.1%2004-2006 Average: 1.3%2011 Average: 0.8%2012 Average: 1.3%

5

4 More Indicators: On Balance Okay, but Nothing Special

Source: Calculated Risk, Federal Reserve Board. EHS supply in April 5.2 months, up from ~4.5 months in late winter, but still good versus 2011. Note: ABI was below 50 in April after 8 months above 50.0.

10

10.5

11

11.5

12

12.5

13

13.5

14

3/31

/198

0

3/31

/198

2

3/31

/198

4

3/31

/198

6

3/31

/198

8

3/31

/199

0

3/31

/199

2

3/31

/199

4

3/31

/199

6

3/31

/199

8

3/31

/200

0

3/31

/200

2

3/31

/200

4

3/31

/200

6

3/31

/200

8

3/31

/201

0

3/31

/201

2

Deb

t Ser

vice

Rat

io

14

14.5

15

15.5

16

16.5

17

17.5

18

18.5

19

19.5

20

FOR

Rat

io

Debt Service RatioFinancial Obligations Ratio

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

0

200

400

600

800

1000

1200

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

12

MM

A Yr/Yr G

rowth

Rate

(line ch

art)

12

MM

A o

f Tot

al S

hip

men

ts in

Mil

lion

s of

Dol

lars

(are

a ch

art)

Total BIFMA Shipments

Global InsightEstimate

s

6

Lending: Bottoming with Strength in C&I

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

11.3%

-1.1%

1.1%

-0.7%

-20% -10% 0% 10%

C&I loans

RE loans

Consumer

Credit cards

2012 2011 2010 2009 0% 5% 10%

C&I loans

RE loans

Consumer

Credit cards

8.7%

0.6%

3.4%

1.8%

First 18 Weeks of 2013

7

Housing (in red): Adding to GDP After 18 Quarters of Negative GDP Contributions; Positive the Last 8 Quarters

Source: US Bureau of Economic Analysis; BB&TCM photo

300,000 homes razed each year

1.2M new households formed each year

7M households formed the last 6 years and 83% went into apartments; normal is 65% to 70%

Housing starts will be up 7-10 years in a row from 2009 trough and will impact driver supply more than trucking volumes

Housing’s contribution to GDP was negative 18 out of 21 quarters from 2006-Q1’11. Q4’12 GDP grew 0.4% and housing added 0.41%; Q1’13 GDP grew 2.4% and housing added 0.30%.

5.4%

-0.3%

1.4%

-1.1%

0.1%

-1.4%

3.0%

-1.2%

1.2%

-0.9%

3.2%

-0.7%

3.6%

-1.1%

2.1%

-1.4%

-0.7

%

-1.2%

1.5%

-0.6%

-2.7

%

-0.6%

-8.9

%

-1.2%

-5.3

%

-1.2%

-0.3

%

-0.6%

1.4%

0.4%

4.0%

-0.1%

2.3%

-0.3%

2.2%

0.5%

2.6%

-0.8%

2.4%

0.0%

0.1%0.0%

2.5%

0.1%

1.3%

0.0% 4.1%

0.3%

2.0%

0.4%

1.3%

0.2%

3.1%

0.3%

0.4%

0.4% 2.4%

0.3%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Q1'

06

Q2'

06

Q3'

06

Q4'

06

Q1'

07

Q2'

07

Q3'

07

Q4'

07

Q1'

08

Q2'

08

Q3'

08

Q4'

08

Q1'

09

Q2'

09

Q3'

09

Q4'

09

Q1'

10

Q2'

10

Q3'

10

Q4'

10

Q1'

11

Q2'

11

Q3'

11

Q4'

11

Q1'

12

Q2'

12

Q3'

12

Q4'

12

Q1'

13

U.S. GDP Growth (vertical) Housing's Drag on U.S. GDP (horizontal)

8

Good Auto Production but Yr/Yr Changes Moderate

Source: BB&TCM; Bloomberg

Yearly changes in auto production moderate in 2013

Three straight years with annual production increases above 1.5M units

Now good absolute numbers, but slower unit growth

2009

2010

2011

2012

2013

E

6

8

10

12

14

16

18

8.8

11.9

13.4

15.816.5

N.A. Auto Production (M)

9

Attn Flatbed Carriers!: New Home Sizes are Growing Again

Source: U.S. Census Bureau; measures average square foot of new construction homes; median sizes are approximately 200 square feet smaller over the years.

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2,050

2,100

2,150

2,200

2,250

2,300

2,350

2,400

2,450

2,500

2,550

2,223

2,266

2,324 2,320 2,330 2,349

2,434 2,469

2,521 2,519

2,438

2,392

2,480 2,505

Average Square Foot

Average Square Foot

10

But Why Does it Not Feel Better? Why is Freight so Inconsistent?

Wasn’t Housing’s Recovery Supposed to Create More Freight & Make us Feel Better?

Source: BBTCM analysis

11

Freight has been Mediocre since June 2012—Why?

Source: ATA for truck data; US Census Bureau for housing starts; Bloomberg for intermodal and auto; Housing starts are annual, seasonally adjusted figures

Housing starts rose 28% in 2012, or by 171,000 units to 781K units

N.A. auto production rose 17% or 2.3M units to 15.8M units

These were greater unit and percentage increases than in 2011

BUT… 2012 truck tonnage grew just 2.3%

after growing 5.8% each in 2011 and 2010

Van loads (–0.7%) shrunk for the second straight year

But N.A. intermodal (COFC) loads grew 6.1% after 6.0% growth in 2011

Housing starts in H2’12 (839K units) were 15.2% above H1’12 (728K); YTD’13 starts up 11.4% vs. 2H’12

So, what is the problem??

2011 1H'12 2H'12 YTD'130

100200300400500600700800900

1000

609728

839935

Housing Starts (000s; Seasonally Adjusted Annual Rate)Truck Tonnage Levels & Growth Rate

5.8%4.3% 1.0% 0.4%

12

Is it an Inventory Problem? Not Really…

Inventories are up in absolute dollars, but…

Inventory-to-sales ratios are reasonable

Inventory-to-sales ratios are up a hair, but not bloated compared to prior yr/yr months

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8Retail Inventories/Sales, NSA

March # of 1.36 was vs. 1.29 and 1.31 in Mar. '12 and '11

1.36

2004 2005 2006 20132007 2008 2009 2010 2011 2012

Jan

Feb

Mar

April

May

June

July

Augu

st

Sept Oct

Nov

Dec

$300,000

$400,000

$500,000

$600,0002011 2012 2013

Source: U.S. Census Bureau and BBTCM analysis.

13

What Else? Industrial Production Slowed (Fiscal Cliff Worries); Few “Animal Spirits”

Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP; ATA for truck tonnage; BBTCM for other comments

Business investment slowed in H2’12

Factory output slowed Even though things have

bounced a bit so far in 2013, every month is inconsistent

Truck tonnage has declined 2 of last 4 months; the 2 months of growth were each over 7%.

5.7%

3.4%

5.4%

2.9%

0.3%

2.6%

4.4%

2.4%1.8% 2.0%

1.3%

3.1%

0.4%

2.4%

0%

1%

2%

3%

4%

5%

6%

2010 2011 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13

GDP vs Industrial Production (yr/yr % change)

IP GDP

14

Other Influences—No Easy Road Ahead

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 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 Truck capacity growth (up

~1.5% in 2012) after shrinking 15% from 2007–2011

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

1,650 1,675 1,700 1,725 1,750 1,775 1,800 1,825 1,850 1,875 1,900 1,925 1,950 1,975

JBI-Average Length of Haul

15

Can Housing Turn 2% GDP Growth into 4%? Even if housing is double its historical average, GDP growth would be aided by

0.6% rather than 0.3%; housing won’t generate 4% GDP by itself

Source: US Census Bureau; BB&TCM

From 1983-2005 (exc. 1989-1991 “mini-bust”) housing represented about 8.3% of annual GDP growth or 1/12 of the economy

1983, 1984, 1986 & 2004 are the only years GDP added more than 0.4% to GDP growth

1983 was the only year housing added 1% or more to GDP at 1.3%

Housing historically added 0.3% to GDP growth or 30 bps

Q4’12 added 0.41% (GDP grew 0.4%); Q1’13 added 0.3% (GDP grew 2.4%)

4.5%

7.2%

4.1%3.5%3.2%

4.1%3.4%

1.9%

-0.2%

3.4%2.9%

4.1%

2.5%

3.7%4.5% 4.4%

4.8%4.1%

1.1%1.8%

2.5%

3.5%3.1%

1.3%0.4%0.1%

0.6%0.1%

-0.1%-0.1%-0.4%-0.4%

0.5%0.3%0.4%

-0.1%

0.3%0.1%0.3%0.3%0.1%0.0%0.2%0.4%0.5%0.3%

-3.5%

-1.5%

0.5%

2.5%

4.5%

6.5%

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1994

1997

1998

1999

2000

2001

2002

2003

2004

2005

GDP Growth vs Housing Contribution to GDP

GDP Growth Housing Contribution to GDP

1983, 1984, 1986 and 2004 only years with housing contributing more than 0.4% to GDP growth

16

What’s More Important to GDP-Housing or Energy?

Housing starts rose 28% in 2012 to 785K and are expected to rise 27% to 30% in 2013 to ~1M units

Starts broke out of a 3-year average of ~585K over a year ago, but haven’t improved freight anecdotes; Why?

Energy is much bigger and drill rig counts are down 12% the last 9 months

Other industrial trends have been sloppy, too

0%

2%

4%

6%

8%

10%

12%

14%

16%

5.5% 5.0%

3.5%

2.2% 2.4% 2.5% 2.7%3.0%

8.6% 8.8% 9.8%

7.5%8.2%

10.2%10.3%

10.1%

Housing as a % of GDP Energy as a % of GDP

Source: Bureau of Economic Analysis, Energy Information Administration and BBTCM analysis.

17

A Tale of 2 Sectors: Van (Decay), Reefer (Growth)

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 twice (2007 @ 1.0% and 2010 at 1.4%)

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

1993-2002 2006-2012 2013 YTD-20%-10%

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

76.7%

-19.4%

-5.0%

Dry Van Load Growth

1993-2005 2006-2012 2013 YTD0%

5%

10%

15%

20% 16.7% 17.3%

5.0%

Refrigerated Load Growth

Sources: BBTCM analysis of ATA data. Commentary is BBTCM.

CAGR:1993-2002: 6.5%2006-2013 YTD: -3.96%

CAGR:1993-2005: 1.29%2006-2013 YTD: 2.98%

18

Key Load Trends Since Peak & Trough

Sources: ATA TRAC report and BBTCM analysis.

Flatbed loads are off 26% from the 2006 peak but are up 10% from trough through 2012; YTD 2013 they are up 1%

Refrigerated loads have grown 17% since 2006 through year-end 2012; YTD 2013 they are up 5%

Tank loads are up 28% since 2006 (think energy and chemicals); food grade, aviation fuel, etc., have had nominal growth

LTL shipments are 14% below the 2006 peak through year-end 2012, but they are up 15% from the mid-2010 trough; YTD 2013 they are down 1%

Dry van loads shrank 19.4% from end of 2006 through 2012, including shrinkage of 3% in 2011 and 1.4% in 2012. YTD’13 they are off 5.0% and are 9.3% below the 2009 “great recession”

19

2011 2012

-5%

0%

5%

10%

15%

3.5%

1.1%

-3.0%-1.4%

-1.5%

6.1%

-4.4%

1.1%

12.0%

2.7%

14.9%

5.8%

Total Loads Van Flatbed Reefer LTL Tank

Van Loads Continue to Shrink; Off 19% from 2006-2012

Source: ATA TRAC report

20

U.S. Merchandise Trade with Mexico by Truck

U.S. truck exports into Mexico have grown 7.8% annually since 2005 and at a 16.4% clip since 2009

U.S. truck imports from Mexico have grown 7.2% since 2005 and at a 15.7% since the 2009 trough

20052006200720082009201020112012

$0 $50,000 $100,000 $150,000

$83,341 $92,992 $93,047

$100,264 $89,417

$111,110 $127,720

$140,856

Exports

2005

2006

2007

2008

2009

2010

2011

2012

$0 $50,000 $100,000 $150,000 $200,000

$112,268

$126,462

$137,037

$134,224

$117,787

$148,948

$167,483

$182,483

Imports

Sources: Department of Transportation BTS and BBTCM analysis. Measures value of goods moved, not number of loads.

21

Carrier Dynamics: Death by a Thousand Cuts! (Not the two “other” theories)

Source: BB&TCM

Not tons of carrier failures

Not tons of repossessions as used equipment values recovered

Instead, “death by a thousand cuts”

22

Tractors: $40,000 More Expensive Since ‘01 but Nothing Added to Residuals; Late-Model Equipment Shortage Will Hurt Many Carriers

Sources: Tractor values from Navistar from 2000-2010; from BB&TCM for 1990, 1995, and 2012; Class 8 tractor sales from A.C.T. Research.

$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 Value4-Year Average Residual

862,

082 90

2,46

6

719,

233

100,000200,000300,000400,000500,000600,000700,000800,000900,000

1,000,000

1997-2000

2003-2006

2008-2012

U.S. Class 8 Tractor Sales

Valu

e Aft

er 1

Ye

ar*$87,000

Lots of late-model used trucks in last two downturns; fewer now

5 years, not 4

*First-year D&A is ~ $38,000, meaning value is $87K after one year.

23

Costs and Mileage Productivity–Not Exactly a Barrel of Monkeys

Source: BB&TCM estimates; ATA Atri division

Carrier costs per mile (excluding fuel expenses) have risen 12.6% since 2008

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

Annual cost inflation has averaged 3.02%

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 20125,000

7,500

10,000

12,500 10,946

8,9267,604

8,250 8,080 7,791

Monthly Miles per Truck

24

Depreciation Costs Rising with Newer, More Expensive Equipment

Source: Carrier data.

Carrier A has >5,000 tractors, Carrier B has ~2,000. Carrier A does not provide trailer ages; Carrier B average trailer age was 3 yrs in 2006; 5.9 at end of 2011; 6.4 at end of 2012.

$0.120

$0.18$0.18

$0.19$0.20

$0.10$0.12$0.14$0.16$0.18$0.20$0.22$0.24$0.26

2000 2003 2006 2009 2012

Carrier A: Good OR, No Debt

Depreciation Costs per Mile

$0.14

$0.21$0.20

$0.22$0.22

$0.12

$0.17

$0.22

$0.27

2000 2003 2006 2009 2012

Carrier B: 100-ish OR; Debt-laden

Depreciation Costs per Mile

Fleet age: 2006 1.34 yrs; 2011: 2.4 yrs; 2012: 2.3 yrs Fleet age: 2006 1.75 yrs;

2011: 2.3 yrs; 2012: 2.7 yrs

25

Maintenance Costs per Mile Rising, Even for “Young-ish” Fleets

Source: Carrier data.

$0.11

$0.16

$0.18

$0.20$0.21

$0.10$0.12$0.14$0.16$0.18$0.20$0.22$0.24$0.26

2000 2003 2006 2009 2012

Carrier A: Good OR, No Debt

Maintenance Costs per Mile

$0.10 $0.11

$0.15

$0.19

$0.21

$0.05

$0.10

$0.15

$0.20

$0.25

2000 2003 2006 2009 2012

Carrier B: 100 OR; Debt-laden

Maintenance Costs per Mile

Carrier A has >5,000 tractors, Carrier B has ~2,000. Carrier A does not provide trailer ages; Carrier B average trailer age was 3 yrs in 2006; 5.9 at end of 2011; 6.4 at end of 2012.

26

Productivity Down, Rates up Modestly, Input Costs Up

Source: BB&TCM analysis; Transport Topics cartoon

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)

Analysis of a composite of carriers. Trailer tractor ratio was 1.7; 2.0; 2.5; 2.8 and 2.5, respectively. All four data figures began at 100.0 in 1990.

27

Top 10 Customers

Top 25 Customers

20%30%40%50%60%70%80%90%

41%

78%

33%

69%

20102012

What Some Carriers are Doing to Minimize Rate-Focused Customers

Source: BB&TCM analysis; Carrier A is top chart and Carrier B is bottom

Top 10 Customers

Top 25 Customers

0%10%20%30%40%50%

18%

44%

15%

38%

20102012

• Top chart occurred even as loads grew 15%

• “Carrier A” focused on mid-sized accounts that are less rate sensitive

• Went from 80 to 150 customers in Chicago alone

28

TL Dry Van Carriers: Not As Many Carriers as You Might Think

Source: ATA, Federal Motor Carrier Safety Administration; Office of Motor Carriers; BB&TCM

• ~600,000 fleets with operating authority, but...• 406,000* can be eliminated due to oddball categories• 70% of the remaining 194,000 operate Class 3-7 trucks• This leaves 58,000 fleets• Approximately 30% of those are private or “not-for-hire” fleets• Of the 41,000 remaining fleets, 58% are dry van• More than half of those 24,000 fleets operate 5 or fewer trucks• About 8,000–10,000 fleets are in the dry van, for-hire market with

more than 5 trucks• Top 250 control approximately 35%–45% of the trucks

*Excludes selected categories (migrant, unspecified, US mail, exempt, government, Indian tribe, private property, private passenger bus, private non-passenger bus, road repair and “other” classifications totaling 406,000 fleets) that do not compete in the OTR truckload market

29

Drivers and Intermodal

Source: ATA’s Transport Topics

30

Intermodal’s Impact to LH Trucking is Greater than Truckers Realize

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%

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

JBI Eastern Intermodal Load Growth

JBI Eastern Load Growth

31

Intermodal is Definitely Gaining Share from Van Trucking…

Source: BB&TCM; ATA data in chart

Domestic intermodal has posted load growth 11 straight years, including 2009

Van TL loads have contracted 8 of the past 11 years, including last two years

Van loads are ~19% below 2006 levels

Domestic container growth has averaged 9.1% annual growth since 2007 (versus GDP growth of ~1.5%)

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

YTD

-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%11.5%

6.7%

-1.2%

-3.7%

-1.3%-0.3%

1.0%

-2.7%

-15.0%

1.4%

-3.0%-1.4%

-3.3%

Domestic Containers Dry Van Loads

32

Why Drivers Leave Their Jobs—It’s a Shipper Problem not Just a Carrier Problem

Source: BB&TCM (photo, analysis and survey); comments on right from BBTCM

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

33

Annual Change in Construction Jobs (000s)—Negative Implications for Truck Drivers from 2013 Onward

Source: BLS, May 2013 report for left table; ATA TRAC report for driver turnover; BLS for unemployment; US Census Bureau for housing starts

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 -1,053 -431 -622

2010 -149 -113 -36

2011 144 50 942012 99 40 60

2013YTD 79 55 24 Construction hiring picking up in 2013Lots of cash payments in 2012 and absorption of late ‘11-early ‘12 hiringDrivers will be targeted for hiring

98%

115%

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

E 20%

40%

60%

80%

100%

120%

140%

Housing Starts Driver Turnover

90%

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 2%

4%

6%

8%

10%

12%

Driver Turnover Unemployment Rate

34

HOS May Determine Which Scenario

A Microwave, or a Crock Pot, Crunch?

Source: BB&TCM

35

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

Source: BB&TCM photo

• 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

36

1. Payments in 30 days or less (70% of carrier expenses due inside of 8 days); fair FSC (no BTF)

2. Weekend freight!!!!!!!3. Bids: talk to key partners on key lanes4. After awarding lanes give sufficient time to

implement5. Honor bid commitments6. Bring new opportunities to partners first7. Have driver friendly facilities and people8. Velocity improvement in shipper network9. Avg. daily volumes from Q1 to Q4 so as to set up

surge capacity; lane flow seasonality; minimize end

of period gymnastics10. Use EDI; also timely resolution of claims & payment

issues11. Use multiple service offerings12. Publish competitive metrics12A. Access to top management 1x-2x a year12B. Windows in lieu of appointments to make driver

productive in HOS world12C. Constant communication about carrier and shipper

networks; networks can change weekly and carriers are not always “hiding capacity”

12-Step Program to Become a Shipper of Choice

Source: BB&TCM

37

Procurement Mentality

• Run competitive bids• Seek the lowest price• Don’t discount overall value but price is a

big component• Useful for inventory, planning and

operations• Allows a Co to periodically test where the

market is• Can be a good thing, but…

The Problem

• Businesses: tend to be saddled with fixed costs and capital investments OR people challenges related to intellectual assets-rarely both

• Ex: steel and software• Trucking is the worst of both worlds, i.e.,

large fixed costs and capital needs with very high people turnover (inc. non-driver turnover, e.g., getting chewed out for failing on 15-min delivery windows)

• Q: is your organization left with procurement professionals or transportation specialists?

Shippers: Be Wary of the Procurement Trap

Source: BB&TCM

38

Shipper Tips

Source: BB&TCM

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

• Next-day lane service is shortening—what does that mean for your network?• Fleets are tiering driver pay: What tier of drivers are you getting?• Slip-seating: if HOS gets cut [again], ask what fleets are doing to promote this from 1%-

2% of trucks to 20+%• Floor loading vs. pallet loading…opportunities?• Ask: what percent of your fleet do you withhold for market opportunities vs. pre-

booking?• 5 levers to pull: (1) dedicated; (2) intermodal; (3) brokerage; (4) increase core carriers;

(5) grow in-house fleet. • Ask: what lever(s) make sense that we have not pulled?

• Fix: Only 70% of shipments are unloaded in less than two hours• Fix: ~80% of van loads are drop and hook, but 85% of reefer loads are live load/unload• Fix: Penalties for early deliveries and/or no acceptance• Address: Shipper/receiver focus upon inventories and dock door management, cutting

into flexibility when more flexibility is needed

39

2004 Backdrop• ’00-’02: 3 years of record carrier

failures• Bush tax cuts May 2003• HOS announced July 2003

(effective 1-4-04)• Many shippers took capacity for

granted• IP growth rate doubled• Auto sales @ 16M+ units and

housing @ 1.8M units

2013–2014 Environment• Modest carrier failures (’07-’11)• Tax increases in 2013-2014• Obamacare and other regulations

and costs• Shippers anticipating next capacity

squeeze since 2007 mini-downturn• Shippers: 5 levers pulled regularly• Auto sales @ 16M and housing

@ 1M+ units• Pending HOS change? (July)

Is There Another 2004 Out There? Maybe

40

Shippers• Capacity has been relatively loose

since June, but be wary…• Capacity could tighten on a

dime; don’t be penny-wise and pound foolish

• Positive economic surprises would make it clear there are not enough trucks

• HOS will hurt productivity and accelerate failures

• Between housing and HOS balance could shift in H2’13 or in 2014 to carriers

Carriers• Engage shippers about productivity

hit on HOS• Show your costs, but also recognize

that supply and demand drives rates

• Focus on the “660 (soon to be 600) challenge”

• Determine customers that hurt you the most when HOS changes

• Know your costs per hour and remember not all hours are created equally

Summary

Source: BB&TCM analysis