87th NCLTL Conference June 2018 Myrtle Beach, SC ELDs The Economy Drivers How Long Will the Party Last?

ELDs and Load Turndowns-The Market Adjusted Well Before April 1 Chicago Outbound Tender Rejections: 32% of Daily Loads Rejected in Mid-February but Just 25% by Early April Source: freightwaves.com Sonar data services

LA Saw Tender Rejects Rise a Month after Hard ELD Enforcement LA also suffered the usual post holiday slump, so not all is ELDs Source: freightwaves.com Sonar data services

Driver Hours Were Below Trend-line Before ELDs and Remained so Until April When Hard Enforcement Started Drivers average 6.52 hours of drive team per day (includes delays, breakdowns, detention and driving) Source: freightwaves.com Sonar data services.

Quick ELD Factoids ELD implementation had an impact: Various surveys showed that 70% to 80% of fleets with fewer than 100 trucks had yet to implement ELDs in the fall ahead of the December 18 soft enforcement start date One ELD company sold 781 devices from April (its founding) though October but sold 5,900 ELD devices in just November and December ahead of the December 18 mandate; they sold over 10,000 units in Q1’18 Large Fleets Focus: Raised pricing on ‘tweener lanes (more than 1 day, less than 2 days; more than 2, etc.) Implemented more time-based pricing even though customers still saw RPLM Tightly managed their networks back to optimal designs Out of network tenders either denied or charged huge premiums Small Fleets Focus: Driver retention was the focus Lifting productivity ASAP Increased reliance on freight brokers even more to “get rate” to offset productivity hits Piggybacked on large carrier rate momentum

Freight’s Vital Signs Point to Continued Strength in 2018-2019 Above ~52-53 Freight Feels Good!! Sources: ISM (Institute for Supply Management) on left; Cass Information Systems on right. Left chart: above 50 means the US economy, especially manufacturing, is growing.

Other Freight Vital Signs-Employment and Tonnage-Are Up Unemployment is Down and Truck Tonnage is Up Sources: Bureau of Labor Statistics on left; ATA on the right. 2018 is year-to-date is through May for unemployment and April for tonnage.

The Driver Shortage is Projected to Get Worse in the Coming Years Source: ATA 2017 Driver Shortage study.

The Aging Driver Workforce is Certainly Real Anticipated Retirements Likely to Accelerate in the 2020s 27% over 55 Source: The National Transportation Institute

As Housing Recovers Driver Turnover Typically Deteriorates As Housing Recovers TL Driver Turnover is Likely to Exceed 100%-a “Capacity Governor”? 130% 87% 50% Sources: US Census Bureau for housing; ATA for driver turnover

Quick Driver Factoids Driver Availability Considerations: The deterioration in TL driver turnover of 16 points from 74% to 90% from the March to June quarter in 2017was the second worst sequential deterioration since 1995; industry turnover has hovered around or just below 90% According to the ATA, in 2017, the average age of a truckload driver in 2017 was 49 years old; the aging driver base acts as a bit of a “capacity governor” for industry capacity additions In 1993 9% of drivers were 55-64 years old, but by 2014 20.1% of the drivers were 55-64 years old In 1993 60% of the drivers were 25-44 years old, but by 2014 just 29.6% were 25-44 Source: ATRI Driver Study 2014

Freight: A Short Party Like 2014-1H’15 or More Like 2003-2006? 2014 and 1H’15 Were Good, then Freight Collapsed-Comparing Now With Then The 2H’15-2016 Slump The Case for 2018 AND 2019 Global commodities collapsed Oil went from $110/bl to $26 Oil rigs collapsed 81% from 2,360 units to 447 at trough IP declined 8 straight quarters 3% capacity addition in Jan 2015 as HOS 34-hour restart relaxed Tax code was status quo Global commodities recovering Oil prices are ~$70 a barrel Oil rigs up 146% to 1,159 from 447 trough IP grew 2+% in 2017 and could exceed 3% growth in 2018-2019 ELDs shrunk total industry capacity anywhere from 2% to 8% Tax cuts good for consumer spending Tax reform to buoy corporate profits and bonus depreciation to spur capital investments Freight creation to benefit from both factors