Surface Capacity-Is 2012 Finally the Tipping Point? [No] Thom Albrecht, CFA Managing Director (804) 787-8210 [email protected] FOR REQUIRED DISCLOSURES,

Surface Capacity-Is 2012 Finally the Tipping Point? [No]

Thom Albrecht, CFAManaging Director

(804) [email protected]

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

mailto:[email protected]

Thom Albrecht804-787-8210

Let’s Start with the Right BBT!

2

NOT!


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


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


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


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


Restaurant Trends Positive for Economy

7Source: NY Times, March 17, 2012


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


The Gap Between Spending on Equipment & People is the Widest of Any Recovery

9

Source: Wall Street Journal, January 17, 2012


Truckload Supply & Demand-At Equilibrium

Blue=TL Tractor Count

Red=Loads

Excess Supply

Sources: ATA TRAC and BBTCM analysis.


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.


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


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


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


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”


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


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.


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)


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.


CSA, DRIVERS, RATES & INTERMODAL

21Cartoon from Transport Topics


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


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%.


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


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


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


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


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…


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


MISCELLANEOUS CONSIDERATIONS &

INFLUENCES

30


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.


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.


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


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.


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).


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.


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.

Documents

Surface Capacity-Is 2012 Finally the Tipping Point? [No] Thom Albrecht, CFA Managing Director (804) 787-8210 [email protected] FOR REQUIRED DISCLOSURES,