Transportation Monitor - Great American Group 2015 — Transportation Monitor 2 Recent Appraisal Trends2 Global demand for cranes and lift equipment has continued to gain strength

1 June 2015 — Transportation Monitor

1

Transportation Monitor


1 Introduction

Transportation markets have experienced slow but steady growth in the

first half of 2015. Proliferation of intermodal transportation has been a

key factor in the overall growth of the market. Though declining

recently, the oil and gas industry continues to be a strong driver of

demand in all sectors of the transportation industry.

The market for cranes and other lift equipment has

continued its trend of slow and steady growth. Gains

experienced in 2014 have continued, most notably with

boom trucks and other medium to small-sized cranes,

which weigh 150 tons and under. The current

secondary marketplace has shifted focus toward end-

users whose demand is primarily for smaller units,

rather than large rental companies as was previously

observed. In North America, Texas and Florida have

emerged as high-demand regions for crane equipment.

Truck and trailer markets in North America have

begun to experience some decline in recent months.

While these trends are not expected to continue into

the distant future, it is important to monitor upcoming

changes to domestic emissions standards that may

have broad effects on the viability of certain types of

units in the secondary marketplace.

The first half of 2015 has shown continued stability in

the construction equipment market. Instability in the

domestic energy sector has caused some uncertainty;

however, large numbers of residential housing starts

have created high demand for smaller units.

However, the North American mining sector has

experienced a severe downturn in recent months.

Large losses in commodity prices have resulted in

multiple business closures and subsequent auctions.

The U.S. freight rail sector currently maintains an 18-

month backlog for new railcars to replace aged units

and to meet the growing demand for the transport of

crude oil, frac sand, and other related commodities.

According to the Intermodal Association of North

America’s Intermodal Market Trends & Statistics report,

global intermodal volume increased 4.8% in 2014

compared to 2013. In addition, despite a traffic

slowdown related to the now-resolved West Coast port

labor dispute, domestic container volume increased

5.7% in 2014, while international container volume

increased 4.4%.

Backlogs for commercial aircraft at Airbus S.A.S.

(“Airbus”) and The Boeing Company (“Boeing”) stood

at record levels of approximately 6,386 and 5,789,

respectively, as of December 31, 2014. Both Airbus and

Boeing have reported that they have an approximate

eight-year backlog, as many airlines deferred the

replacement of a large number of aging aircraft over

the 2000-to-2009 period. In addition, more efficient

new aircraft introductions, additional requirements for

more aircraft to support the projected long-term traffic

growth, record capacity utilization rates, and the low

cost of financing new aircraft have driven the global

airline industry to place record orders for new aircraft.

Various public transportation authorities for major

U.S. cities have increased their purchases of buses in

relation to requirements by the Environmental

Protection Agency for tighter emissions standards.

The marine industry has grown steadily for

recreational boats since bottoming out in 2011 due to

improved economic conditions and rising incomes.

Industry participants note their cautious optimism for

continued growth.


2 Recent Appraisal Trends

Global demand for cranes and lift equipment has

continued to gain strength through the first half of 2015.

Used equipment in particular has experienced dramatic

gains, with North America leading the way by

representing nearly 80% of used crane purchases in 2014.

While versatility and efficiency continue to be important

drivers of demand in the secondary marketplace, cost has

become a stronger force behind decision-making for crane

operators and rental companies. These buyers have begun

to focus on customer and job-specific factors when

purchasing used equipment, often resulting in equipment

re-entering the secondary marketplace once a job has been

completed. Nearly 75% of cranes purchased at auction in

2014 were purchased by end-users, with rental companies

accounting for less than 2% of auction sales. However,

renters and contractors have expressed key strategic

reasons for seeking used equipment and are expected to

continue to be players in the secondary marketplace.

Recent years lack sizeable technological advancements in

crane equipment. As a result, buyers are looking toward

the secondary marketplace for used equipment that carry

the same capacities and capabilities as newer equipment,

without the high cost of a brand new crane. Further, with

the specifics of jobs and customers in mind, buyers may

opt to purchase a used crane with lower capacity rather

than a new crane with higher capacity, but also a higher

price tag.

This is especially the case for the 150-ton-and-under class

of cranes, the largest class in the industry. However,

industry experts believe these factors do not apply to

higher-capacity classes of cranes. For these units, the cost

savings of a used versus new crane can often be

outweighed by the expense of conditioning a used crane to

acceptable working condition.

In the current secondary marketplace, Texas and Florida

have become the most in-demand locations for the

purchase of crane and lift equipment, with 30% of the

cranes sold at auction being sold in Texas alone. Colorado,

Spain, and the Netherlands represent the rest of the top-

five locations for crane sales. Sales in Texas have been

primarily driven by the oil and gas industry. While that

industry has experienced some declines recently, industry

leaders suggest that oil prices have a larger effect on new,

rather than used, equipment pricing. It is also worth

noting that new emission standards in California and

other western U.S. regions will begin to affect used

equipment pricing, as end-users are forced to seek specific

crane types with newer tier engines in order to meet these

standards.

Outside of standard crane markets, tower cranes have

experienced a resurgence in demand, especially in

domestic markets. Tower cranes had been experiencing a

slight decrease in demand as recently as 2014. That trend,

however, was short lived, as domestic usage has greatly

improved, up over 40% from last year. In the last three

months, many rental companies have reported a 75% to

90% utilization rate. While not as active as the North

American market, overseas demand has shown some

stability during the third quarter of 2014. However

promising, this trend has not yet translated to movement

of equipment to overseas markets, such as Europe and the

Middle East, where demand for cranes can be met by local

inventories.

Finally, rental companies have initiated a consolidation

trend within the industry. Over the last six months, top

crane renters in the U.S. have completed multiple large

mergers and acquisitions of competitors in order to

increase their market share.

2010 Liebherr LTM1400 400-ton Capacity All-Terrain Crane



Demand for truck tractors has steadily increased over the

last several years. According to ACT Research, production

of Class 8 tractors is expected to reach 340,000 units in

2015, up 14% from 2013. Along with this increase in

production, retail sales are expected to grow at the same

rate.

This trend bodes increasingly well for recovery values in

the secondary marketplace. According to the American

Truck Dealers, pricing for used Class 8 sleeper tractors has

been up 5% in recent months and is trending toward

record-breaking numbers. Further, the average mileage for

used trucks entering the secondary market has decreased,

indicating that fleets have begun to use shorter trade cycles

resulting in greater numbers of late-model truck tractors on

the market.

Alongside the expansion in the truck market, trailer sales

have also grown. The top 25 trailer manufacturers in

North America increased their production rates 20% over

the last year. Wabash National, one of the largest trailer

producers, is expecting to increase its shipments by as

much as 10% in 2015 alone. The secondary marketplace

has remained strong for used trailers. Demand for

refrigerated trailers, as well as liquid and bulk tankers, has

remained solid. Further, while not as strong as recent

years, auction results for other types of trailers, such as

goosenecks, drop becks, and dry van trailers, have

remained relatively stable.

Looking ahead, the secondary marketplace for truck

tractors is expected to continue to remain strong. The

decreased cost of fuel in North America and rising tonnage

of shipments forecast a strong market for equipment in this

sector. With April bringing the lowest cost for diesel fuel

since 2009, older units in the secondary marketplace may

see enhanced recovery values given the current lowered

cost of operation for these units. Further, with tonnage

rates rising month to month, and up an estimated 5% in

March 2015 versus the same month in 2014, fleet operators

may be on the lookout for ways to expand their fleets

quickly and will need to do so via the secondary

marketplace given increasing, long lead times for new

units.

Government mandates with an emphasis on fuel efficiency,

may lead to instability in the market for trucks. The

Environmental Protection Agency (“EPA”) is expected to

introduce new regulations that would require truck

tractors, which currently operate at between five and six

miles per gallon, to increase fuel efficiency to as much as

nine miles per gallon. These regulations may have

multiple effects: the cost of new units could increase by as

much as 10%, which would likely drive buyers to the

secondary marketplace in order to save on costs. However,

the EPA estimates that this increase in cost would be offset

by fuel savings in as little as 18 months. In addition, the

U.S. government has recently signed the Highway and

Transportation Funding Act of 2015, which should serve as

an arbiter of increased spending on highway

infrastructure, making truckload shipments an even more

viable option in the coming years and further expanding

the market.

2015 Volvo VNL64T780 Truck Tractor

2015 Dragon Vacuum Trailer



The market for used construction equipment continues to

remain stable as the global economy grows. However,

mining equipment has been severely affected by the

downturn in the global commodities markets.

In April 2015, construction starts in both residential and

non-residential markets were up, signifying strength in the

market and leading to a six-year high in construction

spending. Accordingly, residential home construction was

up 20% in this time period. As a result, in the secondary

marketplace for construction equipment, the units in

highest demand have been compact equipment types such

as track loaders and skid steers. These types of equipment

can be used for a wide variety of projects and are also

easily transported between job sites, increasing their

desirability.

Recently, studies have reported as much as 54% of

construction equipment in the U.S. is owned by equipment

rental companies, with that number expected to reach 60%

in the next five years. This suggests that newer contractors

are becoming more comfortable with renting equipment

rather than purchasing new or used equipment.

Further, construction equipment rental, especially in the

case of smaller equipment, has begun to shift focus.

Companies, such as Compact Power Equipment, that

specialize in short-term rentals of smaller equipment, have

expanded rapidly over the last several years, taking

advantage of a new and developing market.

Mining activities have experienced severe declines in

recent years. Precipitous declines in global commodities

markets for coal, copper, steel, and petroleum, among

others, have resulted in oversupply and severe decreases

in pricing. Iron ore, for example, has decreased from $115

per ton last year to only $55 per ton in recent weeks. This

decline in pricing has resulted in multiple business

closures due to bankruptcy over the last year. Absent a

catalyst for demand and a rebound in pricing, this trend

will likely continue into the foreseeable future.

The outlook for the global mining industry is bleak.

Investment in Canadian oil sands declining 30% in 2015

and Chinese imports of iron ore dropping 12% month-to-

month, are just two examples of the strain the global

mining sector is currently experiencing. The U.S. has also

been hit hard, with an estimated 18,000 jobs lost in the

mining sector in May, representing approximately 8% of

the total workforce, bringing the total to 68,000 and

representing the fifth straight month of job losses.

Recent auctions have resulted in medium to small-sized

equipment performing better than larger pieces, given the

humbled recovery expectations as a result of industry

decline. Large earthmovers and loaders performed well

below expectations in these auctions. In addition, heavy

haul trucks are experiencing a market surplus leading to

considerably depressed recovery values. Medium and

smaller machines performed better. These units met or

exceeded expectations in auction scenarios; however, this

should not be viewed as an indicator of strength given the

reduced expectations.

2005 Caterpillar D11R Crawler Tractor

Assorted Haul Trucks in Operation


5 Overview

The U.S. freight rail network is a $60 billion industry that

consists of 140,000 rail miles operated by seven Class I

railroads (railroads with operating revenues of $433.2

million or more), 21 regional railroads, and 510 local

railroads. According to the U.S. Department of

Transportation’s Federal Railroad Administration, the

140,000-mile system moves more freight than any other

freight rail system worldwide, but it also provides 221,000

jobs across the country and numerous public benefits

including reductions in road congestion, highway

fatalities, fuel consumption and greenhouse gasses,

logistics costs, and public infrastructure maintenance

costs.

The U.S. freight railroads are private organizations that are

responsible for their own maintenance and improvement

projects. Compared with other major industries, they

invest one of the highest percentages of revenues to

maintain and add capacity to their system. The majority of

this investment is for upkeep to ensure a state of good

repair, while 15 to 20% of capital expenditures, on average,

are used to enhance capacity.

Freight is moved by rail, water, pipeline, truck, and air.

The rail network accounts for approximately 40% of U.S.

freight moves by ton-miles (the length freight travels) and

16% by tons (the weight of freight moved).

On the rails, bulk freight such as grain and coal typically

ships in railcars, while consumer goods such as items

found at a neighborhood store ship in containers or trailers

called intermodal traffic.

Intermodal traffic refers to the transport of goods on trains

before and/or after transfers from other modes of

transportation such as planes, vessels, or trucks. It has

been the fastest-growing segment of the freight rail

industry since 1980.

Railcars

At the end of 2014, the North American fleet included

1,553,000 railcars. Fueled by the demand for more tank

cars for crude-by-rail (“CBR”) and covered hopper cars for

frac sand and commodities, the industry currently

includes an 18-month backlog for new railcars. According

to highlights from the 29th annual Rail Equipment Finance

Conference in March 2015, the industry anticipates over

50,000 railcars will be manufactured in 2015. Railcars

maintain a lifespan of approximately 50 years, with a

current replacement rate of 30,000 railcars per year.

Tank Cars

The industry manufactured over 34,500 tank cars in 2014,

with three-quarters utilized for CBR and related energy

applications, while the balance was utilized for chemicals

and agriculture.

The U.S. fleet in 2015 includes 364,847 tank cars, with

approximately 43% utilized for the chemicals market, 21%

utilized for the agriculture market, 13% utilized for the

crude oil market, and 10% utilized for other markets.

Industry insiders indicated tank car manufacturers are on

pace to build 9,000 units per quarter in 2015.

In May, the U.S. Department of Transportation issued new

regulations for tank cars transporting flammable liquids,

requiring for an increased width of exterior shells and the

addition of head shields and thermal protection. New cars

must be built to these higher specifications, while existing

cars must be upgraded. Certain retrofits must be complete

by May 2017, while the final deadline for all others is 2025.

The new regulations are a boon to the market for new and

retrofitted tank cars for flammable liquids.


6 Overview

FREIGHT RAIL (continued)

Boxcars

The boxcar fleet of Class 1 railroads includes

approximately 125,000 units. Based on industry insight,

the fleet size continues to decline as units age out, and new

build replacements do not match the retired units. Over

the period from 2015 to 2030, industry experts anticipate

75,000 boxcars will be retired.

In addition, although the 50‐foot boxcar is today’s most

common size, manufacturers seek to build a larger 60‐foot

boxcar to increase freight capacity. Shippers, such as pulp

and paper company Georgia‐Pacific, are balking at the

proposition, as it currently maintains the load spacing to

accommodate the standard, smaller size.

Boxcar manufacturers have seen declining use by shippers

in the automotive and paper industries. In 1994, boxcars

handled approximately 11% of all rail traffic. By 2011,

boxcars accounted for just 2.6% of all rail traffic.

Locomotives

At the end of 2014, the North American fleet included over

37,400 locomotives, of which approximately 80% was

owned by the Class 1 railroads (BNSF, Canadian National,

Canadian Pacific, CSX Transportation, Kansas City

Southern, Norfolk Southern, and Union Pacific). The

median age for locomotives was 19.2 years old.

Locomotives in North America are built by one of two

manufacturers, GE Transportation (“GE”) and Progress

Rail’s Electro‐Motive Diesel division (“EMD”). Over the

last four years, OEMs have continued to move from DC

(direct current) to AC (alternating current) locomotives.

The primary advantages of AC traction are adhesion levels

up to 100% greater than DC, much higher reliability, and

the reduced maintenance requirements of AC traction

motors.

In addition, OEMs are producing locomotives with higher

4,000 horsepower, with six versus four axle units. In 2014,

GE manufactured and delivered 729 locomotives, while

EMD manufactured and delivered 640 locomotives. BNSF

was the largest buyer for both manufacturers. In addition,

GE and EMD are fully booked for 2015, with GE expected

to produce over 1,000 locomotives and EMD anticipated to

produce over 600 locomotives.

GE is expected to offer Tier‐4 compliant diesel locomotives

in 2015. In effect since January 2015, the EPA’s stringent

Tier 4 emissions standards call for the single largest

reduction in diesel locomotive emissions under the EPA’s

tiered program.

The standards require a 70% reduction in particulate

emissions and a 76% reduction in NOx, compared to

engines introduced in 2005. EMD plans to offer Tier 4

locomotives in 2017.

INTERMODAL

Every year, nearly 25 million containers and trailers are

moved using intermodal transportation including truck,

railroad, or ocean carrier. According to the Intermodal

Association of North America’s (“IANA”) Intermodal

Market Trends & Statistics report, global intermodal volume

in 2014 increased 4.8% compared to 2013 to total 16,276,892

containers and trailers.

The following graph illustrates global intermodal volumes

in the first quarter of 2015 versus the same period in 2014:

A labor dispute between shipping lines and the union that

represents 20,000 dockworkers at 29 U.S. West Coast ports

conjested international trade at seaports handling about $1

trillion worth of cargo annually. In early 2015, after nine

months of negotiations, the parties reached a deal.

Despite the resulting traffic slowdown at the West Coast

ports, domestic container volume increased 5.7% to

6,444,532 units in 2014, while international container

volume increased 4.4% to 8,166,010 units.

413,061

1,473,124

1,886,188

1,891,266

3,777,454402,049

1,568,581

1,970,630

1,883,031

3,853,661

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Global Intermodal VolumesFirst Quarter 2015 versus 2014

2014 2015Source: Intermodal Association of North America

-2.7%

6.5% 4.5% -0.4%

2.0%


7 Overview

Furthermore, the increases have continued in the first

quarter in 2015, with total intermodal shipments rising 2%

over last year’s first-quarter volumes.

Domestic intermodal loads grew 4.5%, buoyed by

domestic containers, which rose 6.5% in a quarter-over-

quarter comparison. International container volume fell

by only 0.4% despite the West Coast port congestion.

While the East Coast has snagged more trans-Pacific cargo

from the West Coast in recent years, this is expected to

moderate, even with the scheduled opening of the Panama

Canal expansion in 2016, which will allow larger ships

from Asia to get to the East Coast.

According to Joni Casey, president and chief executive

officer of IANA, “Some East Coast ports can’t effectively

handle the larger ships, never will. And the overall cost of

movements to many of our inland destinations still favor

the West Coast, which accounts for about 48% of all

container traffic.”

For 2015, North American intermodal growth is expected

to remain steady at between 4% and 6%. The stronger

dollar and lower fuel prices, however, could trigger

stronger container import growth of between 9% and 10%,

generating between 230,000 and 300,000 of additional

international intermodal railcar loads.

Overall sales for the U.S. aerospace industry grew at an

estimated 4% to $228.4 billion in 2014, according to the

Aerospace Industries Association (“AIA”), with exports

comprising $119 billion.

Civil aircraft, which includes military aircraft, missiles,

spacecraft, and related products, experienced an 8%

increase as civil aircraft orders climbed for the sixth

consecutive year, with foreign orders accounting for 72%

of the backlog.

The AIA indicated overall sales growth was driven in

large part by 1,274 net orders and $40 billion in orders and

commitments for 201 aircraft from Boeing at the

Farnborough Airshow in July 2014.

Backlogs at Airbus and Boeing stood at record levels of

approximately 6,386 and 5,789, respectively, as of

December 31, 2014. Both Airbus and Boeing have reported

that they each have an approximate eight-year backlog.

As a result, most industry analysts believe the outlook for

new aircraft deliveries will be strong for the foreseeable

future.

Aircraft, Engine, and Parts

The aircraft, engine, and parts manufacturing industry

experienced declines in revenue during the recession due

to falling demand for air travel, which was partially offset

by continued demand for military-related products.

Industry revenue began to rebound in the following years

as demand for air travel returned, although federal

funding for defense began to drop by 2011, which

somewhat mitigated growth. Industry revenue therefore

increased at an annualized rate of 1.9% over the past five

years, reaching $181.3 billion in 2014, according to market

research firm IBISWorld, Inc. (“IBISWorld”).

Aircraft accounted for 58.9% of industry revenue for 2014

and included civilian aircraft such as large commercial

aircraft, medium or regional aircraft, business jets,

helicopters, and ultra-light aircraft, in addition to military

aircraft such as fixed- or non-fixed-wing bomber, attack,

fighter, tanker, cargo, trainer, and rotary aircraft. The

aircraft category’s share of industry revenue has risen

slightly over the past five years due to strong commercial

demand.


8 Overview

Engines and engine parts for civilian and military aircraft,

including turbine, shaft, jet, and rocket engines, as well as

the related parts, represented 20.3% of industry revenue.

Recent product developments focus on improved

efficiency and increased composite material used in order

to reduce weight.

Other aircraft parts and auxiliary equipment, such as

subassemblies and parts, mechanical power transmission

equipment, avionics, propellers, helicopter rotors, and

landing gear, comprised the remaining 20.8% of industry

revenue.

IBISWorld forecasts industry revenue will grow at an

annualized rate of 3.5% over the next five years to reach

$215.2 billion by 2019, driven by healthy domestic and

international commercial aircraft demand as the U.S.

economy continues to improve and globalization

continues to spread, but will be partially offset by

declining military spending.

Defense Spending

The U.S. defense budget is one of the primary drivers of

the aerospace industry, as the industry relies heavily on

U.S. government contracts. When the nation is at war, the

industry benefits from increased demand for military

aircraft and parts. According to NASDAQ, the U.S.

accounts for more than 40% of global defense spending,

which represents a major source of revenue for the top

nine global aerospace and defense companies.

U.S. military spending remains by far the world’s largest,

comprising more than one-third of the global total.

However, according to Reuters, the gap between the U.S.

and other countries is narrowing. Defense spending by

Russia, for instance, has risen 30% since 2008, and China’s

military spending is up 40%.

In 2009, the U.S. military budget was approximately $700

billion. In contrast, the budget request for 2015 stands at

$496 billion, plus an estimated $79 billion for operations in

Afghanistan. For U.S. defense planners already struggling

to implement recent spending cuts, the last year has been

one of the most demanding since the immediate aftermath

of the September 11, 2001 terrorist attacks.

The Obama Administration reduced defense spending for

2013 by $32 billion versus the 2012 budget, including a $27

billion decline in war spending due to the end of the Iraq

war and troop drawdown in Afghanistan. President

Barack Obama has stated the Pentagon’s budget will

continue to invest in higher-priority weapons systems

such as unmanned air surveillance systems.

Think tank CSIS estimated the Pentagon’s base budget

could fall 21% between 2012 and 2021. Downward

pressure would be “unrelenting,” according to the report,

with spending instead drawn to health and social

programs.

However, some military officials warn that the shrinking

budget comes amid recent developments that could

potentially demand military resources from the U.S., such

as conflicts in Afghanistan, Libya, Mali, and Syria, as well

as Russia’s annexation of Crimea and the ongoing

territorial dispute between Japan and China over islands

in the South China Sea.

While the military cuts spell trouble for the aerospace

industry in the short run, many companies have remained

largely stable through diversified portfolios of military

and civil products. Defense spending is now taking a

backseat to healthy commercial demand.

http://www.reuters.com/places/russia?lc=int_mb_1001

http://www.reuters.com/places/afghanistan?lc=int_mb_1001

http://www.reuters.com/places/libya?lc=int_mb_1001


9 Overview

Public Transportation Ridership

According to American Public Transportation Association

(“APTA”), U.S. ridership on public transportation

increased 1.0% to 10.8 billion trips in 2014. Ridership on

heavy, light, and commuter rail increased between 2.9%

and 3.6% year-over-year, while bus ridership decreased by

1.1%.

Last year marks the ninth consecutive year public

transport trips topped the 10 billion mark, according to the

APTA. Although gas prices in the fourth quarter of 2014

were almost 13% lower than those in the same quarter in

2013, public transport trips still saw a 1.1% increase.

Bus and Truck Manufacturing

After volatile swings over the past several years, bus and

truck manufacturers have enjoyed heightened demand for

their products as the economy continues to rebound from

recessionary levels, resulting in higher trade and freight

volumes. In addition, the EPA enacted a final phase of

emissions standards in 2010, which heightened demand

for vehicles that are compliant with these new standards.

IBISWorld forecasts industry revenue will grow at an

average annual rate of 1.9% to $34.2 billion over the five

years to 2020.

The following table illustrates the revenue outlook for the

truck and bus manufacturing industry from 2016 to 2021:

Recreational Vehicles (“RVs”)

Based on data by the Recreation Vehicle Industry

Association (“RVIA”), RV shipments in 2014 climbed to

356,735 units, a gain of 11.1% over the previous year. This

marks the fifth consecutive annual increase and the fourth

double-digit percentage gain in RV shipments since the

end of the last recession.

According to RVIA’s survey of manufacturers, total RV

wholesale shipments were reported at 38,343 units in April

2015, a gain of 4.9% over last month and 13.5% over this

same month last year. This was the 40th consecutive

month in which RV shipments were ahead of the

corresponding month one year earlier, and the best April

in more than four decades.

The following table illustrates historical RV shipments

from 2010 to 2014:

The association anticipates shipments will reach 380,000

units in 2015, a 6.5% increase from 2014. According to a

new forecast presented by RVIA Vice President Mac

Bryan, RV shipments are expected to set a new record in

2016 with wholesale production predicted to total 394,500

units, surpassing the recent peak of 390,362 set in 2006.

Based on RVIA’s RV Consumer Demographic Profile, the

typical RV owner was 48 years old in 2011, one year

younger than the 49 years recorded in 2005 and 2001. The

median income approximated $62,000, and 39% had

children under 18 living at home. In addition, RV owners

aged 35 to 54 posted the largest gains in ownership rates,

rising to 11.2% in 2011 from 9.0% in 2005. Ownership also

edged higher among those aged 55 or older, rising to 9.3%

from 8.6% in 2005.

Year Revenue in Millions Growth

2016 $32.0 2.9%

2017 $32.5 1.8%

2018 $33.2 1.9%

2019 $33.7 1.5%

2020 $34.2 1.5%

2021 $34.6 1.3%

Year RV Shipments Growth

2014 356,735 11.1%

2013 321,127 12.4%

2012 285,749 13.3%

2011 252,300 4.1%

2010 242,300 46.2%

Source: IBISWorld

Source: RVIA


10 Overview

After a dramatic downturn in 2009 and bottoming out in

2011, the marine industry has since steadily grown.

According to a survey by GE Capital, Commercial

Distribution Finance (“CDF”) of a variety of marine

industry participants, including manufacturers, dealers,

and suppliers, nearly 80% of marine industry participants

expect sales to increase between 5% and 10% in 2015. This

figure is up from 54% who expected growth in that range

last year, and almost double from the 43% in 2013.

“The industry continues to grow by offering innovative

products at a variety of price points,” said Bruce Van

Wagoner, president of CDF’s marine group. “As the

demand for boats increases, dealers and manufacturers

want to ensure they are properly staffed and operational

to capitalize on this growth, which we are forecasting to be

around 5% to 6% in units and 8% to 9% in retail sales in

the U.S.”

According to the latest Info-Link Bellwether report, which

tracks boat sales across the country based on new U.S. boat

registrations, April boat sales continued the strong run of

year-over-year sales growth. Sales were up by just less

than 10% for the month on a rolling 12-month basis, on

pace with March’s rate.

The success of the recreational marine industry is tied

directly to the state of the economy, consumer confidence,

and disposable income, as boat owners heavily consist of

affluent customers. As the economy and related indicators

have improved, industry participants maintain cautious

optimism for the marine sector’s future.

In addition, although the overall industry remains smaller

than it was prior to the recession, it is financially stronger

today. Dealers and manufacturers are working together

better than they have in the past, and being more careful

about managing inventory levels, turns, and distribution.


11 Experience

In addition to wholesalers of case and bulk wine, including those mentioned on the previous page, GA also maintains

extensive appraisal experience with numerous domestic wineries, allowing for additional specialization:

GA has worked with and appraised a number of companies within the transportation industry, including industry

leaders in freight rail, aerospace, buses, recreational vehicles, marine, and heavy mobile equipment. GA’s extensive

record of transportation inventory and machinery and equipment valuations also features appraisals for companies

throughout the entire supply chain, including manufacturers and distributors, maintenance and repair companies,

and freight rail refurbishing companies.

GA’s extensive appraisal experience includes valuations

of the following businesses in the freight rail sector:

A provider of maintenance and upgrade services to

companies that own and/or lease rail rolling stock,

primarily tank cars.

An assembler and distributor of electronic railroad

communications and signals, supplying more than 50

railroads including Class 1 and commuter rail

systems.

A builder of new and remanufactured locomotives,

new and rebuilt mechanical materials, electrical

components, technical support, and field services.

GA’s selected experience in the aerospace sector includes

the following:

A distributor of OEM military parts for aircraft,

helicopters, ships, submarines, ground systems,

avionics, and other defense applications.

A manufacturer of aerospace components including

airplane wing frameworks, ice protector systems, and

related products.

A manufacturer of machined aluminum alloy and

stainless steel aircraft parts and equipment for the

commercial airline and defense industries.

A manufacturer of electronics for the aerospace and

defense industries, including motherboards, system

trays, and circuit cards for aircraft color displays.

A distributor of fuses, as well as military, aerospace,

and commercial fasteners to distributors, OEMs, and

repair and maintenance departments.

An importer and distributor of premium-quality

fastener products including over 60,000 varieties of

fasteners, such as bolts, cap screws, nuts, washers,

tapping screws, steel stock, locknuts, and machine

screws in standard and metric configurations.

GA’s appraisal experience includes valuations of the

following businesses in the buses and RVs sector:

A manufacturer of school and activity buses, sold

through independent distributors to school districts,

churches, businesses, government agencies, and not-

for-profit organizations throughout the U.S.

A leading manufacturer of luxury tour coaches within

the U.S. and Canada serving tour, charter, line-haul,

and commuter transit operators.

A contract manufacturer of industrial components

and electronics, including components sold to

manufacturers of vehicles in classes five through

eight, such as trucks and buses.

A manufacturer of public safety, security, and

environmental products, with a division selling

chassis and chassis-based vehicles such as street

sweepers and vacuum trucks.

GA’s selected appraisal experience for the marine sector

includes the following:

An international manufacturer and distributor of

recreational boats under several original brand names.

A designer and constructor of custom inland and

ocean-service vessels and equipment, which also

operates a marine repair facility.

A distributor of parts and accessories for marine

crafts, as well as recreational vehicles, motorcycles,

and all-terrain vehicles.

A developer, manufacturer, and distributor of OEM

and aftermarket marine components and accessories,

primarily for the recreational boating industry.

A designer, manufacturer, and distributor of specialty

performance and racing aftermarket parts for boats, as

well as for motorcycles and snowmobiles.


12 Experience

Moreover, GA has liquidated a number of aviation products companies such as Flyi-Independent Air, Bombardier,

Cessna Aircraft Company, Airbus, and Hawker Beechcraft Corporation, as well companies involved in the sale of

buses, motor coaches, transit buses, touring coaches, and parts inventory in the secondary markets through

liquidations of companies such as Daimler Chrysler, Vector Bus Co., ABC Bus Co., Green Lawn Tour & Coach Co.,

and Mark IV Industries, Inc.

GA has also been involved in the asset disposition of many industrial contractors, rental construction equipment

companies, oil and gas service companies, and freight haulers such as Affholder Construction, American Sand &

Gravel, Canron Construction, Chesapeake Construction, City of Cedar Hill, Cook Harriet Construction, DE Rice

Equipment Construction, Ibarra Concrete, Joe Bland Construction, Marine Pipeline, Mohawk Concrete, Pease

Construction, Pickus Construction, R.E. Holland/American Excavating, Rinker Material Group/Twin Mountain

Rock, Roads Construction, SelectBuild (BMC West), Stigler Construction, Super Transport, Tamrock Drill Rigs, U-

Brothers, Victory Industrial, WDC Exploration, James River Coal, PT Borneo Mining Services, and Marine World.

In addition to our vast appraisal and liquidation experience, GA maintains a staff of experienced automotive,

freight rail, and energy experts with personal contacts within the respective sectors that we utilize for insight and

perspective on recovery values.


following businesses in the trucks and trailers sector:

A provider of truckload shipping services with an

emphasis on environmental concerns, using Class 8

truck tractors.

A provider of chemical transportation services via a

large fleet of liquid and dry bulk tank trailers.

A transporter of petroleum and energy sector

products, operating for nearly 75 years.

GA’s selected experience in the crane sector includes the

following:

One of the largest providers of crane rental services in

all sizes and varieties in North America.

A provider of crane rental services to construction

operations in Louisiana and East Texas.

A provider of rental services for the utilities sector,

specializing in various sizes of boom and bucket

trucks.


following businesses in the construction sector:

A provider of rental and sales services of lift

equipment such as telehandlers, aerial lifts, and lift

trucks.

A leading heavy civil construction company that

specializes in the building and reconstruction of

transportation and water infrastructure projects.

A distributor and renter of construction and

earthmoving equipment throughout the Southeastern

U.S.

A provider of small construction equipment rental

services throughout the U.S. and Canada, operating

from Home Depot locations.


following businesses in the mining sector:

A leading miner and explorer of coal properties.

A coal mining and production company operating in

the central Appalachia region, controlling mining

rights to over 80,000 acres in various parts of

Kentucky.


13 Monitor Information

The Transportation Monitor relates information covering most transportation sectors, including industry

trends and their relation to our valuation process. GA provides our customer base with a concise

document highlighting the transportation industry. Due to the dynamic nature of the transportation

industry, timely reporting is necessary to understand an ever-changing marketplace. GA strives to

contextualize important indicators in order to provide a more in-depth perspective of the market as a

whole. GA welcomes the opportunity to make our expertise available to you in every possible way.

Should you need any further information or wish to discuss recovery ranges for a particular segment,

please feel free to contact your GA Business Development Officer using the contact information shown

in this and all Transportation Monitor issues.

GA’s Transportation Monitor provides market value and industry trend information in a variety of

transportation sectors. The information contained herein is based on a composite of GA’s industry

expertise, contact with industry personnel, liquidation and appraisal experience, and data compiled

from a variety of well-respected sources believed to be reliable. We do not guarantee the

completeness of such information or make any representation as to its accuracy.


14 Appraisal & Valuation Team

Lester Friedman

Chief Executive Officer

[email protected]

(818) 746-9364

Ken Bloore

Chief Operating Officer

[email protected]

(818) 746-9341

Michael Petruski

Executive Vice President, General Manager

[email protected]

(818) 884-3737

Marc Musitano

Chief Operating Officer

[email protected]

(818) 884-3737

Thomas Mitchell

Project Manager, Automotive Specialist

[email protected]

(818) 746-9356

Mike Marchlik

National Sales and Marketing Director

[email protected]

(818) 746-9306

David Seiden

Executive Vice President, Southeast Region

[email protected]

(770) 551-8114

Ryan Mulcunry

Executive Vice President, Northeast Region, Canada & Europe

[email protected]

(617) 692-8310

Bill Soncini

Senior Vice President, Midwest Region

[email protected]

(312) 777-7945

Drew Jakubek

Managing Director, Southwest Region

[email protected]

(972) 996-5632

Jennie Kim

Vice President, Western Region

[email protected]

(818) 746-9370

Daniel J. Williams

Managing Director, New York Region

[email protected]

(646) 381-9221

About Great American Group

Great American Group is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range

of retail, wholesale, and industrial clients, as well as lenders, capital providers, private equity investors, and professional

services firms. In addition to the Transportation Monitor , GA also provides clients with industry expertise in the form of

monitors for the chemicals and plastics, metals, technology, healthcare, food, and building products sectors, among many

others. For more information, please visit www.greatamerican.com.

Great American Group, LLC is a wholly owned subsidiary of B. Riley Financial, Inc. (OTCBB: RILY), which provides

collaborative financial services and solutions through several subsidiaries, including: B. Riley & Co. LLC, a leading investment

bank which provides corporate finance, research, and sales & trading to corporate, institutional and high net worth individual

clients; B. Riley Asset Management, LLC, a provider of investment products to institutional and high net worth investors; and

MK Capital Advisors, LLC, a multi-family office practice and wealth management firm focused on the needs of ultra-high net

worth individuals and families.

B. Riley Financial, Inc. is headquartered in Los Angeles with offices in major financial markets throughout the United States

and Europe. For more information on B. Riley Financial, Inc., please visit www.brileyfin.com.

Headquarters

21860 Burbank Blvd. Suite 300 South Woodland Hills, CA 91367 800-45-GREAT www.greatamerican.com

http://www.greatamerican.com

http://brileyfin.com/

Documents

Transportation Monitor - Great American Group 2015 — Transportation Monitor 2 Recent Appraisal Trends2 Global demand for cranes and lift equipment has continued to gain strength