Economic & Motor Carrier Industry Update March 26, 2015 Bob Costello Senior Vice President & Chief Economist ATA

General Economic Themes GDP growth forecasted to be the best since Consumer spending improved in the 4 th quarter and should accelerate starting in Q Lower oil prices will continue to help economic growth manufacturing to remain strong. 5. Housing starts finally surpassed 1 million in 2014 and will accelerate in 2015.

Quarterly Real GDP & Forecasts Sources: BEA & ATA %2.4%3.0%2.7%

Key Economic Indicators for Trucking Year-Over-Year Percent Change Source: ATA’s Economics Department

Real Consumer Spending (Includes Goods & Services) Sources: Bureau of Economic Analysis & ATA

Sources: BLS and ATA More Jobs = More Pay Short-term-unemployment rate (26 weeks or less) Wage growth of nonsupervisory workers

Crude Oil & Retail Gasoline Prices Source: IHS

General Trucking Themes 1.Truck freight volumes were solid in the last three quarters of Seasonally softer so far in 2015 (expected) and now they are picking up. 2.Truckload & LTL industries are adding a little capacity in recent months, but remain well below all-time highs. Fleets will continue replacing tractors in 2015 – this year should be the peak in truck sales with a slight decline in Revenue per mile is picking up due to improved demand and limited capacity. 4.Driver shortage is as bad as ever. 5.Fleets continue to see rising costs x fuel. Fleets using fuel savings to pay drivers more and replace trucks. 6.Many small fleets were thrown 2 life lines in 2014: Drop in fuel and surge in spot market rates.

Truck Freight Trends

Source: ATA Truckload Industry Loads Index: 2000=100; Seasonally Adjusted %1.5%2.2%2.7%

Source: ATA’s Trucking Activity Report LTL Shipments Index: 2000=100; Seasonally Adjusted %2.4%7.2%5.5%

Truck Capacity Trends

For-Hire Tractor Changes & Class 8 Tractor Sales Source: ATA’s Trucking Activity Report and ACT Research 2015 Outlook for Tractor Sales Remains Strong

TL Tractor Capacity Index Level (1997=100) & Year-over-Year Percent Change Source: ATA’s Trucking Activity Report %-4.4%-5.4%1.7%2.6%0.1%-3.1% -9.6% 1.1% -8.6% Includes employee and leased on independent contractor tractors.

LTL Tractor Capacity Index Level (1997=100) & Year-over-Year Percent Change Source: ATA’s Trucking Activity Report %-3.8%-11.0%-4.3%1.7%-1.7%4.0% -19.6% 4.0% -14.7%

Capacity: Other Thoughts 1. Don’t expect a big boost across the board from the 34-hour restart victory 2. Don’t expect drivers from the oil fields to flock to OTR trucking 3. One help: Reduce driver waiting times, increase driving time

Revenue Trends Finally, some gains, but costs are rising too.

Truckload Revenue/Mile Year-over-Year Percent Change Source: ATA’s Trucking Activity Report Data is a mix of contract and spot freight. Excludes FSC.

Source: ATA’s Trucking Activity Report & DAT.com ATA’s data is a mix of contract and spot freight. Excludes FSC. Truckload Revenue/Mile & Spot Rates Year-over-Year Percent Change

Source: ATA’s Trucking Activity Report ATA’s data is a mix of contract and spot freight. Excludes FSC. LTL Revenue/Ton Year-over-Year Percent Change 2014 was negatively impacted by increases in tons/shipment.

Operational per Mile Costs of Trucking: 2013 Source: ATRI Analysis of the Operational Cost of Trucking Fuel Percentage Excludes Fuel Surcharges

Source: EIA Diesel Fuel Price

Source: ACT Research Some fleets are losing good drivers because their equipment is too old. The average truck age for the publicly traded TL carriers was just over 2 years in 2014 compared with 6.2 years overall. U.S. Class 8 Trucks: Average Age Years

Today’s Tractors Are More Fuel Efficient, But At A Cost Tractor Model Year Starting MPG Sources: ACT Research & ATA Over the last 10 years, MPG has improved ~29%, but new sleeper prices are up ~38%. Nearly 70% of the tractors on the road today are getting 6 MPG or less. Only 18% are getting better than 7 MPG.

Driver Trends

Source: ATA Truck Driver Turnover Rates *2014 Average is for the first three quarters only.

Source: ATA TL Truck Driver Turnover Rates *2014 Average is for the first three quarters only. Large TLs have at least $30 million in annual revenue.

DRIVER SHORTAGE Source: ATA 35,000 At current trends, the shortage could balloon to 240,000 – We are in big trouble if it gets there and don’t expect it to. The shortage is primarily an OTR TL issue.

Driver Shortage: Causes 1. Demographics Age Women 2. Lifestyle - For many, job of last resort 3. More alternatives today 4. Regulations 5. Overall – many, many reasons THE DRIVER IS KING & THIS IS A SUPPLY CHAIN ISSUE

Median Employee Driver Age

Truck Driver Age Demographics

Gender Statistics Source: Bureau of Labor Statistics

Driver Shortage: Effects 1. Difficult to add capacity – this will keep the supply/demand balance in favor of motor carriers for the foreseeable future. 2. Operational hardships 3. Increases costs 4. Freight delays 5. Fleets will continue replacing tractors aggressively due to the shortage: 1.Larger carriers see a young fleet as a recruitment tool 2.Smaller fleets have been losing drivers due to the higher average age of their tractors, which is why they are replacing their equipment. And, this group can finally buy new trucks as the spot market surged in 2014 and they are saving money on fuel.

Driver Shortage: Solutions/Market Reactions 1. Pay is increasing 1.Base pay 2.Many fleets are changing pay models where possible 3.Sign-on bonuses 4.Benefits 5.Problem: It’s more than just pay 2. Everyone needs to treat drivers better 1. Don’t hold up drivers at docks 2. Shippers: delivery windows are better than appointments 3. Shippers need to work with their customers 3. Lower interstate driving age? Maybe, but not anytime soon 1.Intrastate 2.Insurance Carriers – many fleets can’t hire drivers less than 23 years old.

Driver Shortage: Solutions/Market Reactions 4. Immigration? Unlikely - Mexican carriers – Not a solution 5. Fix Congestion/Infrastructure - Drivers are sick of sitting in traffic 6. Boost Productivity? 1.LTL Double 33s, maybe 2.TL weight or length – unlikely anytime soon 7. Oil Field Driver to Fill the Gap? - Could help a little, but not long term 8. Returning Military – It helps, but there are challenges

Annual Employee Driver Compensation 2013 Median Pay Including Incentives and Bonuses *Solo Drivers Only Source: ATA’s Driver Compensation Study 2014

Percentage of Carriers Offering Sign-on Bonuses Source: ATA’s Driver Compensation Study 2014 The fact that a third of private fleets and LTLs are offering sign-on bonuses is alarming. We’ve never seen these types of numbers. TL: 48% and rising quickly

Carriers Offer Many Benefits to Employee Drivers (Percent offering the benefit) All Data Includes Employee Drivers Only

Summary 1.Annual economic growth will be better in 2015 than Truck volumes have picked up and will remain good in Capacity to remain constrained with pricing proxies increasing as a result. 4.The driver shortage is as bad as ever. Recent pay increases are helping, but not solving the problem. Pay to increase robustly again this year. 5.The drop in diesel fuel helped fleets order new trucks and pay drivers more. 6.Carriers will continue refreshing the fleet in 2015 (peak) and 2016.