2013

Report
Is the Capacity Tipping Point Finally Here?
“A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.”
-Winston Churchill
Agenda:
Why Did It Not Feel Better in 2012-2013?
What Happened Since November?
Freight Data-Just the Facts, Ma’am
Economy: Points to Ponder
Capacity: Hither and Thither?
Photos from BB&TCM
1
The Numbers Say it was Better, but in Trucking it Didn’t Feel that Way
2011
•
•
•
•
Auto prod. at 13.4M units
Housing starts at 609K
Unemployment of ~8.5%
Truck tonnage rose 5.8%; total
TL shipments rose 3.5%; van
loads fell 3.0%
2013
•
•
•
•
•
Auto prod. @ 16.6+M units (+4% yoy)
Housing starts at ~923.4K units
Unemployment Finished @ 6.7%;
70+% of new jobs are part-time
Truck tonnage is up ~8.6% since
’11; total TL shipments up 2.4%;
van loads flat
What’s Going On?
Source: BB&TCM analysis; cartoon from ATA.
2
Why? IP Slumped, Lots of Other Issues…
 When IP grows below
3%, freight gets sloppy
GDP vs Industrial Production (yr/yr % change)
 E-Commerce
7%
 Supply chain & packaging
changes
6% 5.7%
 Product size changes
4%
 Optimization of
everything from the
network to the trailer
reduced shipment counts
3%
 Intermodal…
0%
 Much rooted in the “great
recession” and high fuel
prices of 2008 and
resulted in…
5.4%
4.8%
5%
3.7%
3.4% 3.6%
2.8%2.6%
2.5%
1.8%
2%
4.1%
2.9%
2.5%
2.5%2.5%
4.4%
2.6%
1.9%
1.1%1.2%
1.2%
1%
-1%
2.8%
4.1%
0.3%
0.1%
2010 2011 2012 2013 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14
-1.0%
-2%
Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP.
IP
GDP
3
Example: Van Shrank (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 three times (2007
@ 1.0%, 2010 at 1.4% 2013 @ 1.1%)
Reefer’s annual acceleration reflects an
active FDA, aging population
demographics, focus on fresh foods, etc.
Dry Van Load Growth
100%
CAGR:
1993-2002: 6.5%
2007-2013: -3.1%
76.7%
50%
-19.8%
+1.1%
0%
1993-2002
2007-2012
2013
-50%
Refrigerated Load Growth
20%
16.7%
17.3%
15%
10%
CAGR:
1993-2005: 1.29%
2007-2013: 2.1%
2.5%
5%
0%
1993-2005
Sources: BB&TCM analysis of ATA data. Commentary is BB&TCM.
2006-2012
2013
4
Don’t Underestimate Intermodal’s Momentum vis-à-vis Trucking
5.3%
3.9%
5%
4.8%
-1.2%
-5%
-1.3%
1.4%
1.0%
0.2%
0%
3.2%
2.9%
1.1% 1.1%
-0.3%
-1.4%
-2.7%
-3.7%
-3.0%
-10%
Q1'14
2013
2012
2011
2010
2009
2008
2007
-15%
2006
-15.0%
Domestic Containers
Source: BB&TCM; ATA and IANA data in chart
9.4%
7.0%
6.7%
2005
 Domestic container growth
has averaged 9.2% annual
growth since 2007 (versus
GDP growth of ~1.8%)
7.0%
12.2%
9.6%
9.3%
10%
2004
 Van loads are ~18% below
2007 levels
13.5%
2003
 Van TL loads have contracted
8 of the past 12 years,
including 3 of last 5 years
15%
2002
 Domestic intermodal has
posted load growth 12
straight years, including 2009
Dry Van Loads
5
Other Influences—Friendly to Supply Chains, but Not to Truckers
2009
28% 27%
25%
2010
23%
2011
2012
21% 22%
20%
15%
Private Fleet Backhaul %
JBI LOH Has Shrunk ~ 15%
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
Q209
Q109
4Q08
3Q08
1,975 1,954
1,950
1,925 1,918
1,914
1,900
1,913
1,875
1,879
1,850
1,831
1,844
1,825
1,806
1,817
1,800
1,782
1,798 1,795
1,775
1,788
1,784
1,777
1,750
1,761
1,726
1,720
1,725
1,741
1,703
1,723
1,688
1,700
1,714
1,704 1,697
1,675
1,691 1,693
1,687
1,669
1,650
1,625
1Q07
 Broader supply chain changes
2008
25%
2Q08
 Aggressive effort to lower
deadhead by private in-house fleets
(down 8 points in 6 years); this has
created 2 points of truck capacity
30%
1Q08
 On-line shopping growth, creating
more parcel, LTL and less TL
(proportionate to LTL & parcel)
30%
4Q07
 The growth of intermodal highway
conversion in the East (see JBI
chart on right)
2007
35%
3Q07
 Packaging Revolution
2006
2Q07
 TMS Systems
JBI-Average Length of Haul
Source: BB&TCM; backhaul figures from ACT Research ; JBI LOH data from J.B. Hunt
6
Costs and Mileage Trends–Not Like the 1990s
 Carrier costs per mile (excluding
fuel expenses) have risen 12.9%
since 2008
 Numerous fleets have bought
used tractors and trailers to
offset the higher costs of new
equipment
2008
 Driver pay and benefits could
be entering a highly
inflationary period
Source: BB&TCM estimates; ATA Atri division
2010
2011
2012
$1.152
$1.116
$1.062
$1.020$1.046
$1.20
$1.10
$1.00
$0.90
Carrier Costs per Mile (Excluding Fuel)
 Annual cost inflation has
averaged 3.1%
 However, driver wages fell in
2009 and were flat in 2010
2009
12,500
Monthly Miles per Truck
10,946
8,926
10,000
7,604
8,250
8,080
7,752
7,757
2010
2011
2012
2013
7,500
5,000
2007
2008
2009
7
What Happened the Last Few Months?
IP Accelerated
Weather
1) Networks out
of kilter
2) Killed older
capacity
Rail Service
meltdown:
~150,000 loads
left rails first 11
weeks of 2014
Source: BB&TCM
Easy Comps
May/June: port
strike fears
HOS:
3% Hit
Will July-September be
their usual “mediocre”?
8
Easy Comps or a Better Economy? Van (top) & Reefer Clues
•
•
•
•
•
•
•
Dry van load growth picked
up last 5months of 2013
Van loads grew 3.9% last 5
months of 2013 versus
(3.7%) shrinkage in 2012
Was it a real pick-up?
Or easy comps given the
fiscal cliff worries of 2012
and European debt worries
of 2011?
IP did grow 4.8% in Q4’13,
but it too had an easy
comp
Jan ’14 (-0.37%), Feb ’14
(+1.38%) and Mar (+2.24%)
were nothing special
Reefer: easy comps 3 of last
4 months in 2013
2011
2.4%2.6% 2.3%
1.6%
6.2%
0%
-5%
-2.5%
-10%
Aug
-1.3%
-8.5%
Sept
2011
Oct
2012
5%
Nov
-8.4%
Dec
2013
7.7%
10%
2.7%
1.9%
0.5%
4.1%
1.5% 1.8%
2.7%
0%
-1.7%
-5%
Aug
Sources: BB&TCM commentary; ATA for load data
2013
7.1%
10%
5%
2012
Sept
Oct
Nov
-2.8%
Dec
9
LTL Shipments Saw the Same Year-End Bump
• LTL shipments (not
tonnage) also benefitted
from easy comps
2012
10.0%
• Only “strength on
“strength” comp was Oct
at +6% vs. +8.5% in Oct
’12
• Jan ’14 (+2.1%) and
Feb’14 (+5.0%)
0.0%
Sources: BB&TCM commentary and ATA for data
13.7%
15.0%
• Last 5 months of 2011
saw double-digit growth
5.0%
2013
10.2%
8.5%
6.0%
1.8%
1.5%
0.1%
-0.4%
-5.0%
-10.0%
Aug
-8.4%
Sept
-7.1%
Oct
Nov
Dec
10
On-Line Sales: The “Wild and Crazy Guy” for all Q4s?
$300
Sources: US Census Bureau for e-Commerce figures. Note: Talbots is a private company.
$115
$100
$50
$45
$28 $35
$58
$74
$93
6.5%
2013
5.2%
2012
4.7%
2011
2010
4.0%
2009
2008
2.1%
2007
1.8%
3.0%
2006
0.9% 1.1%
1.4%
2.5%
3.5% 3.6%
4.4%
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
E-Commerce: % of Retail Sales
2005
9%
8%
7%
6%
5%
4%
3%
2%
1%
2001
$0
2004
 Modest shipping charges won’t
change habits (Talbots example)
$150
2003
 Omni-channel approach so
important
$169
$138 $142 $145
2002
 Amazon is to logistics what
Walmart was in the 1980s2000s
$200
2000
 On a steady path to at least 10%
to 12% of mix eventually
$226
$195
2001
 E-Commerce accelerated in
2013 as mobile apps improved
$250
2000
 Has grown 15.6% annually since
2009 “great recession”
$259
On-Line Sales ($Bil)
11
Q4’13: Retail’s Impact on Freight-This May be the ‘New Normal’
• Store foot traffic is off 54%
the last 3 years!!!!
• The last 5 weeks of 2013 saw
foot traffic fall 12.8%, but
brick & mortar retail sales
rose 2.7%
• Online sales were 6.2% of
retail in 1st 9 months of 2013;
then 14% last 5 weeks of
2013
• Q4’13 zaniness not just a
function of a late
Thanksgiving and a
Wednesday Christmas
Sources: US Commerce Department, US Census Bureau; BB&TCM channel checks; photos from BB&TCM
12
Is Recent Tight Capacity Merely a Re-dux of 1H’2010?
1H’10
•
•
•
•
•
•
•
Awful weather in Feb/March
Load acceptance fell
Truck availability difficult
Spot market spiked Feb-June
“Next capacity crunch” declared by
carriers
But CSA, HOS, CARB, etc., were nonexistent or different
By mid-July it was ‘over’ for 3+ years
Source: BB&TCM analysis; cartoon from ATA.
Late ‘13-early ‘14
•
•
•
•
Weather stunk; spot soared
HOS started slow, but took a bite by
fall 2013
Actual & pending regs will continue to
grow, i.e., “creeping capacity crunch”
Unlikely to go back to looseness of
2012-2013 but not yet a huge
crunch
13
Freight Data-Just the Facts, Ma’am
14
Shipments: LTL & Tank Remain the Stars
Total Loads
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Van
Flatbed
Reefer
LTL
Tank
14.9%
12.0%
6.6%
6.1% 5.8%
3.5%
-1.5%
2011
-3.0%
-4.4%
Source: ATA TRAC report
2.7%
2.5%
1.1%
1.3% 1.1%1.4%
1.1% 1.1%
-1.4%2012
2013
5.9%
1.6%
0.9%
7.0% 6.6%
4.4% 5.1%
3.0%
1.4%
-0.1%
2014YTD
2014 April
-1.7%
-3.5%
15
Now Reefer is Really Smoking (pun intended)!
Reefer Loads Up 20% Since ‘06
110
100
90
80
Reefer Trailers Have Grown 3.4% in 7 Years
355,000
350,000
345,000
340,000
350,592
• Reefer loads have averaged
3.3% annual growth since
the end of 2003
120
337,537
• Reefer loads have grown 9
of the last 10 years
130
10%
8%
7.7%
7.6%
6.6%
6%
4%
3.1% 2.6%
2.5%
2%
1.1%
0%
-2%
-4%
-4.4%
-6%
2006
2008
2010
2012
339,189
• Since the end of 2006
reefer loads have grown
20.3% but trailers are up
just 3.4%
140
335,000
330,000
2006
Sources: BB&TCM commentary; ATA for load data; ACT Research for reefer trailers
2008
2010
2012
16
Flatbed Capacity: Thankfully Energy & Auto (Steel) Have Been Good
Flatbed Loads
130
-0.7%
120
-5.2%
-9.5%
110
100
Sources: BB&TCM commentary; ATA for load data; ACT Research for reefer trailers
-20%
-20.7%
90
80
-30%
2006
2008
2010
2012
Flatbed Trailers Have Fallen 6.8% in 7 Years
310,000
300,000
290,000
298,166
• However, flatbed loads
remain 25% below the last
peak as the negatives of
sluggish construction
outweigh the positives of
energy
-10%
277,836
• Flatbed loads have grown
9.7% since the ’09 trough
Percent Change 10%
6.1%
3.9%
1.1%
0%
-1.5%
274,192
• Flatbed trailers are off
8.3% from their ’07 peak
140
280,000
270,000
260,000
250,000
2006
2008
2010
2012
17
Since 2011 Construction has Hired 543,000 Workers—Up to 130,000
were ex-Truck Drivers
-173
1,000
60
2005
416
268
148
2006
152
-62
214
2007
-195
-271
76
2008
-789
-515
-274
500
40%
0
20%
Housing Starts
Driver Turnover
160%
12%
136%
140%
127%
10%
120%
2009
-1,047
-428
-619
2010
-192
-131
-61
2011
144
50
94
99%
100%
8%
80%
6%
60%
39%
4%
Driver Turnover
13:Q3
12:Q4
12:Q1
11:Q2
10:Q3
09:Q4
09:Q1
08:Q2
98
07:Q3
31
06:Q4
124
06:Q1
2014YTD
05:Q2
40
04:Q3
116
03:Q4
156
03:Q1
2013
20%
02:Q2
56
01:Q3
58
00:Q4
114
00:Q1
40%
2012
80%
2013
230
2012
290
2011
2004
100%
60%
2010
-34
2009
161
2008
127
2007
2003
2006
88
99%
98%
2005
-85
1,500
2004
Jobs (000s)
120%
2,000
2003
Jobs (000s)
140%
2002
Construction
2,500
2001
Construction
Non-Resid.
Jobs
(000s)
2000
Residential
1999
2002
Total
1998
Year
2%
Unemployment Rate
Construction hiring picked a bit in 2013, with further acceleration in 2014
Lots of cash payments in 2012 and absorption of late ‘11-early ‘12 hiring
Drivers are targeted for hiring
Source: BLS, June 2014 report for left table; ATA TRAC report for driver turnover; BLS for unemployment; US Census Bureau for housing starts
18
Domestic Intermodal: Gonna Take Another 15% Bite out of LH TL
 Long-haul trucking remains
very vulnerable to rail
intermodal
 Truckload market greater than
700 miles is a $40B 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
Source: BB&TCM; JB Hunt for intermodal chart
JBI Eastern Intermodal Load Growth
50% 46%
45%
38%
40%
35%
32%31%
35%
30%
28%
28%
30%
26%
26% 26%
23%
25%
21%22%
20%
19%
17%
20%
15% 14%14%
12%
15%
9%
10%
5%
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
 Intermodal is a $14B market
JBI Eastern Load Growth
19
The Economy: Points to Ponder
20
Private Economy GDP Growth is “Ok”
 IP has accelerated
recently, a good thing
 But until job creation
consistently
tracks/exceeds 250,000 a
month, the economy will
remain “solidly
mediocre”
 Rising interest rates will
foster more loan growth,
not stifle growth
 Bank spreads remain
very narrow
5%
4.38%
4.05%
3.71%
4%
2.96%
3%
2.95%
2.84%
1.84%
2%
1%
3.17% 3.18%
1.11%
0.25%
0%
-1%
-2%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
(1.03%)
-3%
-4%
(4.31%)
-5%
Private Sector Growth
Source: Bureau of Economic Analysis for GDP; Private economy GDP is exclusive of all government spending (federal, state and local); commentary is BB&TCM
21
…2 Key Freight Drivers Have “Leveled Off”
•
•
•
•
•
•
Housing starts are up 52% since 2011,
but permits have stalled since April ’13
Permits are not impacted by weather
like housing starts
Auto production is up 89% since 2009
low and 24% since 2011 but is
beginning to level off; 2% to 4% unit
growth
More robust job and income growth will
be required for materially greater
improvements
Rising interest rates probably slowed
housing some
70+% of all new jobs last 2 years are
part-time versus a longer-term
average of 53%
How quickly will housing get back to
1.5M units?
Housing Permits
1,500
1,000
1,008
1,005
624
500
0
2011
2012
2013
April
May
June
July
Aug
Sept
Oct
Nov
Dec
Jan
Feb
Mar
April
•
N.A. Auto Production
8.8
2010
2012
11.9
13.4
2014E
0
5
Sources: BB&TCM commentary, US Census Bureau (housing) and Bloomberg (auto production). Housing in 000s; autos in millions.
10
15
15.9
16.6
16.8
20
22
Chemicals: Quietly Signaling Strength
Yr/Yr % Change in US + Canadian Chemical Shipments Ex-Petroleum
8.18%
7.66%
4.70%
5%
7.26%
4.24%
0%
-5%
-3.40%
-3.65%
-4.02%
-6.34%
-10%
2013
2014
Figure 1: 2013 - Negative yr/yr change for chemical shipments ex-petrol
60
36
34
40
30
51
48
50
25
24
20
7
10
41
36
32
19
11
6
6
6
1
16 13
7
2014YTD
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
1996
•
9.92%
10%
51 W
49 W
47 W
45 W
43 W
41 W
39 W
37 W
35 W
33 W
31 W
29 W
27 W
25 W
23 W
21 W
19 W
17 W
15 W
13 W
11 W
9W
7W
5W
3W
1W
•
15%
1999
•
20%
1998
•
•
Chemical carloads on the railroads are
encouraging
22 weeks so far
While 13 are down (vs. 16 down weeks
in all of 2013), much of that was
weather
Chemical shipments have been up 7 of
the last 10 weeks
Chemical carloadings are a proxy for
industrial activity
In the next 3 years over 120 new
chemical, fertilizer and petro-chem
plants and expansions will come on
line in the Gulf Coast, totaling more
than $120 billion
1997
•
# Negative yr/yr Weeks
Sources: Association of American Railroads (AAR), Bloomberg and BB&TCM commentary.
23
Long-Term Positive: Household Formations are Running Way Above
Housing Starts
Household Formation Ratio to Housing Starts
43%
1997
94%
93%
82%
1999
53%
2001
219%
64%
2003
107%
37%
2005
65%
58%
2007
120%
85%
72%
61%
2009
2011
308%
188%
2013
149%
0%
50%
Source: US Census Bureau and BB&TCM analysis
100%
150%
200%
250%
300%
350%
24
Lending: Bottoming and Growing Selectively
Q1'14 Trends
0.8%
Credit cards
0.7%
3.5%
Credit cards
Consumer
2.6%
Consumer
-1.0%
RE loans
1.2%
RE loans
7.7%
C&I loans
5.2%
C&I loans
-20%
2013
-10%
2012
0%
2011
10%
2010
2009
Source: Federal Reserve Board. C&I is commercial and industrial and RE is real estate
0%
2%
4%
6%
25
Factoid: Today’s Youth are Different than Us
• Only 40% of Millenials (born
1983-2001) believe it is
important to own a vehicle
compared to 60% for baby
boomers (1946-1964)
• 87% of 19-year olds held a
license in 1983; only 69% did
in 2011
• Why? More comfortable with
shared cars, bikes and public
transit
• Affordability also an issue
• Will impact future freight
Sources: US Dept. of Transportation and BB&TCM analysis; photo from BB&TCM
26
Capacity: Prolonged Crunch or Rolling Headaches in
2014-2016?
Source: BB&TCM/Thom Albrecht for cartoon on left; ATA for cartoon on right.
27
Capacity Crunch or Not?
Bull Case
• Van loads grew 6.2% in Dec ‘13
• Increase in carrier failures in
Q3, Q4 and Q1 despite lower
fuel prices and higher freight
volumes
• Regulatory issues finally
tightening the noose more than
earlier supply chain changes
• Future regulation (ELDs, drug
clearinghouse, etc.) to further
constrict capacity
Source: Commentary is BB&TCM analysis and opinions; photo is courtesy of BB&TCM
Bear Case
•
•
•
•
•
Dec’12 loads fell 8.4% (easy comp)
70+% of jobs last 2 years are parttime; labor participation rate very low
Housing starts: faltered in Q4 and Q1,
hurting GDP over 0.3%
Auto at 16.6M, up from 8.8M and
unlikely to exceed 17.5M
Changing retail season likely to create
chaos last 5-6 weeks each year, esp. eCommerce
• WEATHER!
•
Our conclusion? 2014 is like 2003,
not 2004…a transitional
year…setting the stage for 20152016, which could be highly
inflationary for shippers
28
Tractor Shrinkage Was Close to Shipment Shrinkage by Late 2013

There are 1.3M CL8 trucks 8
years old or newer

2.23M CL8 trucks 15 years old or
newer

We estimate that 70% to 75% of
inter-city freight is hauled by
trucks 8 years old or newer

Little is hauled by 14 & 15 year
old trucks

But some is hauled by 9-12 year
old trucks

Weighting it 70/30 implies the
OTR fleet was down ~16.5%,
implying slight excess capacity
(1% to 2%) last fall and then…

3,000
2,750
Tractor Shrinkage versus Dry Van Shipments
2,500
2,250
2006
-11.7%
2013
2,000
1,750
1,500
-18.9%
-18.1%
1,250
1,000
750
8 Yrs Old or Newer
15 Yrs Old or
Newer
Van Shipments
all heck broke loose…
Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP.
29
Did You Their
Leave YourJobs
Last Trucking
Why DriversWhy
Leave
(PayJob?& Respect)—It’s a Shipper
Problem not Just a Carrier Problem
Does the shipper
42.9%
Pay
38.0%
34.1%
29.8%
Lack Of Recognition & Respect
23.8%
18.3%
Didn't Get Home Enough
18.4%
Didn't Get The Right Loads, Or Enough Loads
22.3%
10.4%
13.8%
I Just Wanted To Make A Change
9.4%
7.3%
They Were Running Me Too Hard
Have Not Lef t A Trucking Job
15.9%
16.5%
Other
28.0%
28.8%
0%
10%
20%
30%
40%
Owner-Operator
50%
60%
70%
Company Driver
Source: BBTCM analysis and survey.
Source: BB&TCM (analysis and survey); comments on right from BB&TCM; cartoon from ATA.
80%
90%
100%
value a driver’s
time?
Bathrooms,
phones
Wifi availability
Helpful staff
Parking availability
Clear signs
Paper work
handled courteously
& simply
3rd Parties @ GateDo they share your
view?
3% rate hike-~1%
goes to driver
30
Pay Rising but Woefully Inadequate
$0.380
 Driver turnover in the 90s for 8
straight quarters
 Turnover managed fairly well,
but the pipeline of new drivers
is weak
 Pay needs to rise to attract new
candidates to the industry
$0.360
$0.345
$0.372
$0.352
$0.329
$0.320 $0.312$0.312
$0.300
Dry Van Per Mile Pay
$0.280
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$0.380
 At $0.372 it has barely budged
since $0.360 in 2008; inflation
alone would be at $0.403
$0.340
Source: BB&TCM estimates; ATA Atri division
$0.349
$0.340
 2013 median driver pay was
$47,544, up 1.92% vs. 2012 but
up just 3.3% since 2008
 In real terms drivers have lost
2.25 cents
$0.361
$0.360$0.360
$0.365
$0.360
$0.334
$0.341$0.341$0.341$0.341
$0.347
$0.343$0.346
$0.354
$0.320
$0.302$0.300
$0.300
Refrigerated Per Mile Pay
$0.280
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
31
Regulations, More than Demand, Will Drive the
Next Crunch-But It’s Coming
Tons of New Regulations
1 Safety information and carrier ratings
2 Special state regulations on trucking (ex: CARB)
3 Opening the border to trucking
4 Elimination or allowing of illegal aliens
5 Variety of health regulations (apnea, medical certificates, etc.)
6 Require ELDs or electronic logging devices
7 Hours of service changes
8 Increase broker bond & require prompt payment of carrier charges
9 More stringent temperature and cleanliness requirements
10 Encourage union membership and require benefits for Ics
11 Examination of fleets for patterns of violations
12 Prevent shipper coercion regarding HOS, CSA, etc.
13 National drug clearinghouse
14 Requiring standard training procedures
15 Test new carriers for proficiency
16 Increase minimum insurance coverage for carriers
17 Tightened OSHA requirements
18 Hold shippers and brokers responsible for hired carriers' safety
19 Limit max governed speed (64 MPH)
20 New vehicle stability controls
Source: FTR Associates and BB&TCM analysis.
Implied Driver Hires Per Quarter Required By Regulation
180,000
160,000
Electronic Stability controls
Speed limiters
140,000
Safe Harbor
120,000
OSHA Worker Protection
100,000
Minimum Insurance
80,000
Entry Proficiency
Training Provisions Driver Effect
60,000
Drug & Alcohol Data Base
40,000
Prohibition Of Coercion
20,000
Pattern Of Violation
-
Employee Free Choice
Safe Food Transportation
32
And A Host of Miscellaneous Factors
 HOS cut “functional capacity” by
~3%
 And empty trucks due to no drivers
is ~4% (maybe more)
 Carrier failures have risen
significantly the last 9 months
despite relatively muted fuel prices
and a modest uptick in volumes
 Fleets are failing as the cumulative
impact of costs and the driver toll
run their course
 Older drivers leaving due to
technology; younger drivers still not
entering the driver force
 ELDs will grow like a musical
crescendo…
Sources: ATA for loads; ACT Research for truck counts and BB&TCM analysis; photo from BB&TCM
33
Driver Miles Equals Driver Smiles
•
•
•
•
•
•
Prep time=pre-trip
inspection, fueling, drug
tests, DOT inspections
PT=breaks, meals,
communications, route
planning, logging
Time at S/R=inefficient
appointments, paperwork,
check-in, check-out
DTE=holidays, surges, traffic,
day of week booking,
network changes
UT=appointment times,
parking issues, fatigue, 70
hour rule, planning
uncertainty, day of week
bookings
DT=Most fleets believe they
can add 30 to 75 minutes
with shipper/receiver help
A Driver's 14 Hour Day (840 minutes)
30
Prep Time
90
438 (7.3
hours)
120
Personal Time
108
Time at
Shipper/Receiver
48
Drive Time Empty
Unused Time
Drive Time
Note: 600 available drive time minutes per day
Sources: BB&TCM proprietary work with a large private fleet, sub-90 OR
34
Shippers, Let’s Talk Strategy and “Big Picture”
• You are not buying transportation, you are buying
capacity…make sure your bosses know the difference
• Don’t let trucking’s economies of scope mask its diseconomies
of scale
• Many of you work for companies with a kaizen, continuous
improvement or lean culture. The average trucker has 4 to
5 drivers for every non-driver. Given the government’s lack
of productivity help, be careful about a “CI” mindset
Source: BB&TCM photo and commentary
35
Stat of the Day
• When President Obama took office in 2009, there was
one person at DOT making over $170,000 annually
• Today, there are 1,800+ people at DOT making over
$170,0000
• No wonder you have a headache!
Source: US Congress for DOT information; picture from BB&TCM.
36
IMPORTANT DISCLOSURES
To receive price charts on the companies mentioned in this report, please contact BB&T Capital Markets Research at 800-552-7757 x8785.
BB&T Capital Markets rating distribution by percentage (as of June 12, 2014):
All companies
under coverage:
Buy (1)
Hold (2)
Underweight/Sell (3)
Not Rated (NR)
48.25%
51.40%
0.35%
0.00%
All companies under coverage to which it has provided
investment banking services in the previous 12 months:
Buy (1)
26.09%
Hold (2)
14.29%
Underweight/Sell (3) 0.00%
Not Rated (NR)
0.00%
BB&T Capital Markets Ratings System:
The BB&T Capital Markets Equity Research Department Stock Rating System consists of three separate ratings. The appropriate rating is determined by a stock’s estimated 12-month total return potential, which consists of 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%
B: Buy H: Hold UW: Underweight 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 12, 2014
BB&T Capital Markets makes a market in the securities of ArcBest Corporation, Celadon Group, Inc., C. H. Robinson Worldwide, Inc., Con-way Incorporated, Covenant Transportation Group, Inc., Echo Global Logistics, Inc.,
The Greenbrier Companies, Inc., Genesee & Wyoming Inc., Heartland Express, Inc., J.B. Hunt Transport Services, Inc., Knight Transportation, Inc., Landstar System, Inc., Marten Transport, Ltd., Old Dominion Freight Line, Inc.,
Roadrunner Transportation Systems, Inc., Saia, Inc., Swift Transportation Company, Trinity Industries, Inc., Universal Truckload Services, Inc., Wabtec Corporation, Werner Enterprises, Inc. and YRC Worldwide Inc..
BB&T Capital Markets has managed or co-managed a public offering of securities for Roadrunner Transportation Systems, Inc. and Wabtec Corporation in the last 12 months.
BB&T Capital Markets has received compensation for investment banking services from Roadrunner Transportation Systems, Inc. and Wabtec Corporation in the last 12 months.
BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from ArcBest Corporation, Celadon Group, Inc., C. H. Robinson Worldwide, Inc., Con-way Incorporated, Covenant
Transportation Group, Inc., Echo Global Logistics, Inc., The Greenbrier Companies, Inc., Genesee & Wyoming Inc., Heartland Express, Inc., J.B. Hunt Transport Services, Inc., Knight Transportation, Inc., Landstar System, Inc.,
Marten Transport, Ltd., Old Dominion Freight Line, Inc., Roadrunner Transportation Systems, Inc., Saia, Inc., Swift Transportation Company, Trinity Industries, Inc., Universal Truckload Services, Inc., Wabtec Corporation, Werner
Enterprises, Inc. and YRC Worldwide Inc. in the next three months.
An affiliate of BB&T Capital Markets received compensation from ArcBest Corporation, Con-way Incorporated, The Greenbrier Companies, Inc., Genesee & Wyoming Inc., J.B. Hunt Transport Services, Inc., Landstar System, Inc.,
Old Dominion Freight Line, Inc., Roadrunner Transportation Systems, Inc., Saia, Inc., Swift Transportation Company, Trinity Industries, Inc. and Wabtec Corporation for products or services other than investment banking 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.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST
For valuation methodology and related risk factors on Buy (1)–rated stocks, please refer to the body text of this report or to individual reports on any covered companies referenced in this report.
The analyst(s) principally responsible for preparation of this report received compensation that is based upon many factors, including the firm’s overall investment banking revenue.
Analyst Certification
The analyst(s) principally responsible for the preparation of this research report certify that the views expressed in this research report accurately reflect his/her (their) personal views about the subject security(ies) or issuer(s)
and that his/her (their) compensation was not, is not, or will not be directly or indirectly related to the specific recommendations or views contained in this research report.
OTHER 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, a division of BB&T Securities, LLC, member FINRA/SIPC, is a wholly owned nonbank subsidiary of BB&T Corporation. The securities sold, offered or recommended are not a deposit, not FDIC insured, not
guaranteed by a bank, not guaranteed by any federal government agency and may go down in value.
The opinions expressed are those of the analyst(s) and not those of BB&T Corporation or its executives.
37

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