Economic & Tank Truck Update. Bob Costello Chief Economist & Vice President ATA April 29, 2014

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2 Economic & Tank Truck Update Bob Costello Chief Economist & Vice President ATA April 29, 2014

3 The US Freight Economy We expected the economy to slow in Q1, but the weather was a significant drag. However, some March data was better than expected. Still, it should be weakest quarter of the year. Q2 should be much better. Housing starts were disappointing in Q1, but it should be the best year since The US energy production boom is a big boost for the tank truck sector. More optimistic on manufacturing activity this year, but it wasn t a big help in Consumer spending has been choppy, but will accelerate in Most headwinds (x weather) that remain are primarily from DC.

4 4% Real GDP & Forecasts 3% 2.8% 2.4% 3.0% 2% 1.9% 1% 0% Sources: BEA & ATA

5 5% 4% 3% 2% Quarterly Real GDP & Forecasts 4.1% Inventory Build 2.6% Inventory Reduction & Weather 2.7% 2.6% 2.6% 1% 0% 0.9% Q Q4 Q Q2 Q3 Q4 Sources: BEA & ATA

6 Annual Housing Starts (Millions of Units) will be the highest level since Sources: Census Bureau and ATA

7 6% 5% 4.6% Consumer Spending (Annual Percent Change) Services Goods 4.6% 4.9% 4% 3% 2% 3.8% 3.2% 3.1% 2.2% 3.5% 1% 0% Sources: BEA and ATA

8 Factory Output (Annual Percent Change) 5% 4% 3% 3.6% 4.4% 2.9% 3.0% 3.9% 2% 1% 0% Sources: Federal Reserve and ATA

9 U.S. Light Vehicle Sales Millions of Units Light auto sales are forecasted to grow from 15.5 million units in 2013 to 16.4 million by % +3.4% +2.4% Sources: IHS & ATA

10 U.S. Plastics Production 2007 = Plastics production is expected to grow about 3.4% per year over the next two years. By 2016, production will finally get back to 2007 levels. +6.1% +3.1% +3.6% Sources: Federal Reserve, IHS, & ATA

11 U.S. Chemicals Production 2007 = Chemical output is expected to accelerate in 2014 and % +2.9% +3.6% Sources: Federal Reserve, IHS, & ATA

12 U.S. Paint Production 2007 = Paint production was solid in 2013 and is expected to remain at above average growth levels over the next two years. +8.9% +5.2% +5.1% Sources: Federal Reserve, IHS, & ATA

13 U.S. Cement Production 2007 = After a poor, but growing, 2013, the rate of growth improves some this year and jumps in % +3.9% +9.3% Sources: Federal Reserve, IHS, & ATA

14 U.S. Food Production 2007 = Food production is expected to grow 2.2% annually over the next two years. +1.6% +2.1% +2.3% Sources: Federal Reserve, IHS, & ATA

15 US Crude Oil Production (Millions of Barrels per Day) Source: EIA

16 Thousand of Barrels per Day 1,600 1,400 1,200 1, Diesel US Exports Diesel vs Gasoline Gasoline Source: EIA

17 US Exports (Millions of Barrels) Diesel: +951% Gasoline: +235% Diesel Gasoline Source: EIA

18 Diesel Prices $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $ WTI $/Barrel $97.91 $95.33 $89.79 $2.71 $ $ $ $ $3.84 $3.97 $3.92 $3.85 $ Source: US Department of Energy

19 Trucking Demand

20 Changes in For-Hire Truck Freight Volumes 8% 7% 6% 5% 4% 3% 2% 1% 0% Tonnage TL Loads Tank Truck Loads 6.2% 6.3% 6.6% 5.8% 4.5% 2.3% 2.5% 0.8% 1.5% Sources: ATA s Monthly Truck Tonnage Report & Trucking Activity Report

21 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% It Was a Tough Q1 for Freight (Percent Change in Seasonally Adjusted Loads) 2013 Q1 '14 YOY 1.2% 0.7% 1.3% -5.1% 2.7% -1.4% 6.6% Dry Van Flatbed Temp Tank Spot market was robust in Q1 (+67% YoY) as shippers tried to get freight moved. Source: ATA s Trucking Activity Report 0.4%

22 Tank Truck Sector Continues to Outperform 10% 8% 6% 4% 2% 0% -2% -4% -0.3% the TL Industry Overall (Q1 Year-Over-Year Percent Change; Seasonally Adjusted) Total TL 0.4% 0.6% -2.3% Tank Truck 2.1% 1.2% 1.5% 1.4% 3.4% 6.8% Loads Miles Revenue Rev/Load Rev/Mile Tank truck includes bulk and liquid commodities. Source: ATA s Trucking Activity Report

23 15,000 Miles Per Truck Per Month are Down too (Includes all types of TL carriers) 10,946 10,000 8,926 7,604 8,250 8,080 7,752 8,066 7,794 5, Q Source: ATA

24 Trucking Capacity

25 2% 0% -2% -4% -6% TL Tractor Changes (Percent Change in the Number of Company & IC Tractors) 0.2% 2013 Q1 YOY Mar '14 vs Dec '07-3.5% -8% -10% Includes all types of truckload carriers -9.0% Source: ATA s Trucking Activity Report

26 TL Supply vs Demand 2005 = Oversupply Through March TL Tractor Count Index TL Loads Index Source: ATA based on Trucking Activity Report

27 Costs

28 7 The Class 8 Fleet Has Aged, but the Industry Is Struggling to Reduce It (Average Age in Years) Source: ACT Research

29 Motor Carriers Are Struggling to Replace Their Trucks $130,000 $120,000 $110,000 New Diesel Tractor (Sleeper) Price Estimate (Annual Averages) $126,000 $100,000 $95,000 $90,000 $80, Source: ACT Research

30 Drivers

31 TL Truck Driver Turnover Rates 150% 125% Large Small 2013 LTL: 11% 100% 75% 50% 25% 0% Source: ATA

32 TL Carriers are Struggling with Independent Contractors as well as Company Drivers (Independent contractor trends over the last two years) Includes all types of TL carriers; January 2012=100; Carriers with at least $30 million in annual revenues Source: ATA s Trucking Activity Report Large TLs: -1.6% Small TLs: -6.6%

33 Average Annual Pay for an Over-the-Road Tractor-Trailer Driver in the For-Hire Truckload Industry $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $39,035 Includes bonuses; All types of TL drivers included Blue bars is actual pay. The orange line is if it kept up with inflation. $52,820 $49, Sources: American Trucking Associations and BLS

34 Average Number of New Drivers Needed Per Year Over the Next 10 Years: 96,178 Non-Voluntary Departures 16% Voluntary Non- Retirement Departures 11% Industry Growth 36% Retirements 37% Source: ATA Benchmarking Guide for Driver Recruitment & Retention

35 Construction Industry Competition 35% 30% 25% 20% 15% 10% 5% 0% 34.3% 28.0% 18.9% 18.3% Housing Starts % 2.1% 3.3% 4.0% Construction Employment Sources: Census Bureau, Department of Labor, and ATA

36 Proposed Tank Truck Industry Project

37 Quantifying the Size of the Tank Truck Industry Piece together datasets to help ascertain tank truck movements Commodity data Truck freight movements Truck capacity data Create a tank truck transportation model Collect some data from current NTTC & ATA tank truck members Tank truck volume, revenue and capacity industry numbers

38 Thanks! Follow me on

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40 National Tank Truck Carriers (NTTC) 66th Annual Conference & Exhibits Phil Byrd, Sr. ATA Chairman

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42 ATA Chairman Phil Byrd, Bulldog Hiway Express National ATA Leadership ATA Vice-Chairmen Duane Long Longistics Pat Thomas UPS Kevin Burch Jet Express David Manning Tennessee Express Secretary John Smith CRST Treasurer Doug Stotlar Conway

43 ATA Offices ATA Capitol Hill Office Washington, D.C. ATA Headquarters Arlington, VA

44 What Has ATA Done for Me Lately? Advocacy Successes in th Circuit Victory Protecting IC Model U.S. Supreme Court Victory Protecting Federal Preemption Authority Sleep Apnea Law Defeat of VA I-95 Tolling Plan Defeat of NC I-95 Tolling Plan

45 What Has ATA Done for Me Lately? Advocacy Successes in 2013 U.S. Court of Appeals Success on Rest Break Issue Expanded by FMCSA to all local drivers Protected 11 hour driving limit Delayed CSA safety rating rulemaking

46 Top Policy/Regulatory Issues Hours of Service Restart Changes Flexible Sleeper Berth Pilot Program CSA Improvements Fuel Efficiency Standards Round II Electronic Logging Device Mandate Drug and Alcohol Clearinghouse Implementation of MAP 21 Freight Provisions Redundant Security Threat Assessments

47 Hours of Service Update Restart Restart restrictions are a real problem T&I Chairman Shuster and Rep Petri requested GAO evaluate FMCSA s Cost-Benefit analysis & restart research ATA working with Appropriators seeking stay to restart changes

48 Hours of Service Update Sleeper Berth Rules ATA, joined by the MN Trucking Assn, recently filed a petition for a flexible sleeper berth pilot program FMCSA is very interested in initiating a pilot program; will work with ATA, MTA and other industry orgs in 2014 Longer term goal is achieve greater sleeper berth flexibility for solo and team drivers

49 Compliance Safety Accountability Top 3 Problems ATA Working On All Scores must measure safety performance; some currently DO NOT DO SO ALL truck-involved crashes are included Public can be misled by inaccurate Scores

50 2014 Legislative Priorities Highway reauthorization Fuel tax increase with indexing Oppose tolling of interstates Dedicated highway freight program Increases in truck productivity Comprehensive tax reform Congressional action on HOS Congressional oversight of CSA

51 2.00 Millions Tractor-Trailer Drivers Demanded and Supplied Trend-Line for Number of Tractor- Trailer Drivers Demanded ,000 potential shortfall Trend-line for Number of Tractor-Trailer Drivers Supplied Source: ATA See for white-paper

52 Non-Voluntary Departures 16% Voluntary Non- Retirement Departures 11% Average Number of New Drivers Needed Per Year Over the Next 10 Years: 96,178 Industry Growth 36% Retirements 37% Source: ATA Benchmarking Guide for Driver Recruitment & Retention

53 REGULATORY FACTORS THAT WILL IMPACT DRIVER SUPPLY Electronic Logging Devices Some Drivers Are Simply Technology Adverse and Will Refuse to Use ELDs. Hours of Service Reduced Productivity Per Driver Will Increase Demand. Sleep Apnea Screening and Treatment Obese Drivers may Refuse To Be Tested or To Endure CPAP Therapy CSA Greater Scrutiny of Safety Metrics Will Make More Drivers Unemployable Medical Registry Tighter Controls on Medical Qualifications Will Weed Out Unqualified Drivers, Further Shortening Supply. Background Checks Redundant and Costly Criminal History Records Checks Are a Hassle Factor for Drivers.

54 Call on Washington in States 357 Hill visits 436 Trucking Executives 75 events at ATA Capitol Hill Office 40 ATA-sponsored; $1m raised for MOCs 12 terminal visits $520,000 raised for Truck PAC GET INVOLVED! LET YOUR VOICE BE HEARD

55 GET INVOLVED! ATA Policy Committees and Task Forces Councils and Conferences Truck PAC Grassroots Action Alerts

56 The Foundations of the Future Purchase A Paver To give back to the Industry Become a permanent part of ATA s Capitol Hill presence To ensure your Legacy in ATA History Preserve your company name Honor your family or a family member

57 Thanks to LEAD ATA s Exclusive Partners! Introducing ATA s New Comprehensive Leadership Program!

58 Image & Outreach

59 Image & Outreach Interstate One Share the Road

60 Image & Outreach National Truck Driving Championship TMC SuperTech

61 INDUSTRY WIDE IMAGE MOVEMENT Engage policymakers and the public in connecting the trucking industry and the nation s economy, and build the political and grassroots support necessary to strengthen and grow our industry in the future. Develop Pride within our own industry and Respect Sign up NOW JOIN THE MOVEMENT!

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