The Outlook of Refrigerated Trucking: From a Financial Analyst
Transcription
The Outlook of Refrigerated Trucking: From a Financial Analyst
The Outlook of Refrigerated Trucking: From a Financial Analyst Perspective Is 2015 the Peak? And What’s Behind This Year’s Lull? “A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.” -Winston Churchill Agenda: How the Lull is Playing Out Is the recent “soft patch” over? Economy: Beyond the Obvious Capacity: Across the Modes & Influences E-Commerce: Think Behavior Capacity Crunch: How Much?... …And For How Long? Source: Cartoon on left from BB&TCM; cartoon on right from Transport Topics 2 The Economy: Stuck Between a “Square Root” Recovery and a “Hockey Stick” Recovery The economy is healing in spite of Washington, DC! Falling Oil Prices and a Strong Dollar are Hurting CapEx in 2015 but there are long-term positives Source: GDP figures from BEA website; commentary BB&TCM; photos from Microsoft Office 2010 3 Why 2015 is Experiencing a “Lull” 2014 (the “Perfect Storm”) • • • • • • • HOS carryover from H2’13 Awful Q1’14 weather Almost no pricing in 2012-2013 Lousy rail service Port strike worries and then… Port congestion and slowdown Zaniness created by e-commerce Source: BB&TCM analysis and comments; cartoon from Transport Topics 2015 (“less than perfect”) • • • • • HOS restart to pre-July 2013 Class 8 tractor growth of 4.4% in last 12 months The “creeping regulatory crunch” is pausing until late 2015 Oil’s fall and a strong dollar are hurting some capital goods Unlikely to go back to looseness of 2012-2013, but it doesn’t feel as “fun” as 2014 4 Lull # 1: Industrial Production Slowed Mostly Due to Oil’s Fall When IP dips below 3%, freight volumes get sloppy In the five quarters before Q4’13, IP averaged 2.5% growth, with one quarter (Q1’13 at 4.2%) subsidizing that stretch IP is more important to freight creation than GDP Example: Q1’14 GDP shrank 2.1%, but IP grew 3.9%; but Q1’15 IP fell 0.3% and GDP fell 0.2% Many GDP components create minimal freight—e.g., tax, law, consulting, entertainment, education, healthcare, etc. Source: BB&TCM analysis and comments of Federal Reserve Board IP data Industrial Production Seas adj.; quarterly changes are at annual rates 5.7% 6% 4.9% 5% 4.1% 3.9% 4% 3% 4.7% 2.5% 2% 1% 0% -1% Q3'12Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15E -0.3% -0.2% 5 Lull #2: Exports Have Been Hurt by Strong Dollar • The strong dollar has hurt the demand for U.S. exports, making our products more expensive to overseas buyers • Many international economies have slowed, a separate issue from a strong dollar Exports’ Contribution to Real GDP Growth 2.0% 1.5% 1.43% 1.0% 0.61% 0.59% Q3'14 Q4'14 0.5% 0.0% • During Q1’15: 91,000 jobs were lost in the energy industry Q2'14 -0.5% -1.0% Source: BB&TCM analysis of BEA GDP report Q1'15 -0.79% 6 Lull #3: Class 8 Fleet up 4.4% in Last Year, But… This includes all tractors, even 30 year old tractors The “true” inter-city fleet (tractors 12 years old or newer) grew < 3% The US/Canadian fleet is ~3.2M trucks; remainder is Mexico The inter-city fleet had shrunk ~16.5% from 2007-2012 LTL, tank and private fleet grew >5%; dry van TL and reefer were ~+1% to 2% growth 3,850 3,800 N.A. Class 8 Tractor Fleet (Figs in 000s) 3,820 1.7% 3,750 3,650 3,780 1.4% 3,750 1.5% 3,710 3,700 3,660 2.0% 1.1% 1.1% 1.0% 0.8% 3,600 0.5% 3,550 3,500 Source: BB&TCM commentary; ACT Research and ATA (Transport Topics) for data. 0.0% Q1'14 Q3'14 Q1'15 7 Case Study: Oil’s 67% Slump in ‘85-’86; Parallels for Now? Oil fell from $30 to $10 ~ 8 to 9 months in 1985-1986 Oil’s collapse in 2H’85 and 1H’86 contributed to a slump in industrial production (IP) those 2 years…but there were also other factors GDP was solid because of the 3-year phase in of the Reagan tax cuts (19821984), but by 1986 growth was slowing… GDP and IP accelerated in 1987 as the negative impact of oil on capex wore off and as new tax cuts (’87) kicked in Summary: Expect more stimulus from the “oil tax cut” in 2016; capex cuts and energy layoffs a drag in 2015, but restaurants benefitting now 8% 7% 6% 5% 4% 3% 2% IP Slumped After Oil Fell 67% 8.9% 7.3% 7% 4.2% 3.5% 1984 $30 9% 5.2% 5.2% 3.5% 4.2% 1985 3% 1% 1.0% 1.2% 5% 1986 GDP 1987 IP 1988 Oil’s Ending Price 1984-1988 $28 $25 $25 $20 $18 $16 $15 $15 Ending Oil Price $10 1984 1985 1986 1987 Sources: Bureau of Economic Analysis (BEA) and Federal Reserve Board (FRB) for GDP and IP; Bloomberg for oil prices. Commentary is BB&TCM analysis. 1988 8 The Economy: Beyond the Obvious Source: Microsoft Office 2010 for cartoons 9 But Spending Patterns Have Changed Since 2007 o The three fastest-growing areas of spending for Americans create little freight per se o Remember the days of a $40 a month phone bill? For many families, cell and data plans today are often $200– $300 o Some of the leading decliners for spending are more “freight intensive” than other categories Changes in Spending by Middle-Income Americans 2013 vs. 2007 Home Internet Cellular Phones Health Insurance Homes (Rent) Health Care Education Food at Home Pets Total Spending Income Furniture Food Away From Home Alcohol Entertainment Major Appliances Homes (Owned) Women's Apparel (16+) Household Textiles Residential Phone 81.3% 49.1% 42.1% 26.0% 24.2% 22.9% 12.5% 10.5% 2.3% 0.2% (3.8%) (3.8%) (4.5%) (5.4%) (8.3%) (11.5%) (17.7%) (26.5%) (30.7%) -60% -40% -20% Source: BB&TCM commentary; Bureau of Labor Statistics for US middle-income spending data 0% 20% 40% 60% 80% 100% 10 Housing Percolating, but Auto Leveling Off 70+% of all new jobs in the last three years are part-time versus a long-term average of 53% The average job created in 2007 paid $60K; today it is $40K; in 2014 more homes over $400K were sold than under $200K-1st time ever Housing Permits 1,500 1,000 1,275 1,015 624 500 0 2011 2013 May July Sept Nov Jan'14 Mar May July Sept Nov Jan'15 Mar May Housing permits are picking up after a 2-year stall in 2013-2014 Auto production is up 100% since a 2009 low (and 48% since 2011) but is beginning to level off; 1%–4% unit growth from here on out? N.A. Auto Production 8.8 2010 2012 2014 2016E 0.0 5.0 Source: BB&TCM commentary, US Census Bureau (housing), and Bloomberg (auto production). Housing in 000s; autos in millions 10.0 11.9 13.4 15.0 15.9 16.6 17.6 17.8 18.0 20.0 11 Exploring the Percolating Housing Market • U.S. residential permits are up 8.1% YTD vs. +5.6% in 2014 • May permits of 1.275M highest since August ’07 at 1.321M • But 4 key energy states (~19% of all permits) are off 3% YTD • Houston-by itself-issued 76% of what all of California did in 2014 • • Had these states maintained last year’s growth, permits would be up ~12% Watch: personal bankruptcies from 2007-2009 beginning to break out of 7-year credit freeze Building Permits Issued 2013 2014 2014 YTD 2015 YTD U.S. 990,822 1,046,363 +19.4% +5.6% 4 Key Energy States 177,057 +9.3% 198,061 +11.9% 320,100 346,100 +8.1% 63,184 61,282 -3.0% Building Permits as a % of U.S. Permits 20% 15% Texas Houston MSA 16.0% 16.0% 14.9% 10% 5% 5.2% 6.1% 5.5% 0% 2013 2014 Source: U.S. Census Bureau; YTD building permit figures are through April for the 4 key energy states (TX, ND, OK, SD) and through May for the U.S. 2015 YTD 12 Households are Deleveraging… 20 14 1980Q1 1981Q1 1982Q1 1983Q1 1984Q1 1985Q1 1986Q1 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 9 Debt Service Ratio 93% 135% 138% 131% 129% 124% 124% 125% 123% 120% 118% 117% 116% 116% 116% 115% 114% 114% 113% 112% 112% 111% 110% 110% 109% 110% 109% 108% 107% Q2'14 Q3'13 14.5 Q4'12 15 9.5 40% Q1'12 15.5 10 60% Q2'11 16 10.5 Q3'10 11 80% Q4'09 16.5 Q1'09 17 69% 11.5 100% 2000 17.5 36% 12 120% 1952 18 Financial Obligations Ratio 18.5 12.5 107% 112% 140% 19 13 Debt Service Ratio 160% 19.5 13.5 2006 14 Total Household Indebtedness Financial Obligations Ratio Source: Federal Reserve Board (FRB). Both measure household debt in different ways. The right table shows that total household indebtedness as a percent of disposable income has fallen to 107% from 138% in 2006. Photo from Microsoft Office 2010 13 …And Bank Lending is Improving 2014 (green) & Q1'15 4.0% Credit cards 2.3% 4.0% Credit cards 5.2% Consumer 1.6% Consumer 5.2% 2.5% RE loans 3.8% 2.5% RE loans 12.0% C&I loans -20% 2014 -10% 2013 0% 2012 12.6% 12.0% C&I loans 2011 10% 2010 2009 Source: Federal Reserve Board. C&I = commercial and industrial, RE = real estate 0% 5% 10% 15% 14 Long-Term Positive: Household Formations Trending Up Household Formation Ratio to Housing Starts 1996 43% 94% 93% 82% 53% 1998 2000 219% 2002 64% 107% 2004 37% 65% 58% 2006 120% 2008 85% 72% 61% 2010 188% 2012 308% 149% 108% 2014 0% Source: US Census Bureau and BB&TCM analysis; photo from Microsoft Office 2010 100% 200% 300% 400% 15 Capacity: TL, LTL, Intermodal & Other Influences Source: Microsoft Office 2010 for photo 16 East Coast Ports May Gain Modest Share 70% 65.0% 63.7% 64.0% 59.4% 60% 55.0% 50% 45.0% 40.6% 40% 30% 36.3% 36.0% 35.0% 20% West Coast Source: Global Port Tracker North America Apr'15 Jan'15 Oct'14 Jul'14 Apr'14 Jan'14 Oct'13 Jul'13 Apr'13 Jan'13 Oct'12 Jul'12 0% Apr'12 10% Jan'12 February 2015 survey of 403 shippers and 191 3PLs indicate they plan to migrate, on average, 20% of their volumes from West to East 40% of shippers using only the West Coast plan to shift some to East Coast 33% of retailers and 25% of manufacturers will shift some to the East JOC June 2015 survey: 43% of shippers plan to shift, but just 5% of volumes East Coast 17 Shipments: LTL Led in 2014; Reefer Leads in 2015 Total TL Loads Van Flatbed Reefer LTL Tank 20% 14.9% 15% 12.8% 12.0% 10% 6.6% 6.1% 6.2% 5% 3.5% 1.1% 0% -1.5% -5% -3.0% -4.4% 2011 -1.4% 3.0% 2.7% 2.5% 1.3% 1.1% 1.1% 1.1% 2012 2013 6.8% 3.5% 2.4% 1.8% 2.0% 2.2% 1.6% 2014 1.7% 0.7% 2015 YTD -3.7% -5.8% -10% Source: ATA TRAC report; photo from BB&TCM; YTD is through May 2015; Note: during the first 5 months of 2014, reefer was up 1.4% 18 Reefer is Really Smoking (pun intended)! 140 7.6% 7.7% 120 6.6% 110 100 101.1 90 % Change 122.7 2.5% 3.5% 1.1% 2.6% 3.1% 5% 0% -5% -4.4% 80 -10% 2006 2008 2010 2012 2014 380,000 360,000 337,537 400,000 359,255 373,339 Reefer Trailers Have Grown 5.9% in 7 Years 420,000 400,105 130 136.7 15% 12.8% 125.8 10% Loads 339,189 • Since the end of 2006, reefer loads have grown 24.5% but trailers are up just 5.9% • Reefer loads have grown ten of the last eleven years • Reefer loads have averaged 3.3% annual growth since the end of 2003 • Reefer trailers grew 2.4% in 2014 but could grow 4+% in 2015 • Factors? Organic food, demographics (pharmaceuticals, etc), food safety regs, life sciences, etc. Reefer Loads Up 24.5% ’06-’14 340,000 320,000 300,000 2006 2008 2010 2012 2014 2016E 2018E Source: BB&TCM commentary; ATA for load data; ACT Research for reefer trailers; Microsoft Office 2010 for photo. 19 Case Study in Reefer Trailers: Marten Transport • Since 2004 MRTN added 1,113 reefer trailers or 35% growth • But MRTN added fewer than 200 tractors • Its LOH fell 41% to 598 miles • Live loads have gone from ~98% of shipments to ~80% • Summary: Most of the trailer growth was to accommodate shorter LOH, more drop & hook and TOFC intermodal (slower turns than OTR) Marten’s Reefer Fleet Grew 35% … 5,000 1.78 4,500 4,218 4,000 3,500 3,000 2.0 1.85 3,928 4,170 1.76 1.8 4,265 1.6 1.38 3,152 1.4 1.31 1.2 2,500 1.0 Trailers … But Was It Truly Growth? 1,200 1,000 Trailer/Tractor Ratio LOH 1,006 937 853 800 655 624 600 598 400 2004 Source: Company reports and BB&TCM 2006 2008 2010 2012 2014 20 180 CPI-U Food and Beverages Refrigerated Rate per Mile 170 157.7 160 152.0 150 140 134.6 127.3 130 126.4 121.4 120 115.0 122.1 122.3 109.6 110 115.9 104.8 105.4 100.0 Source: Bureau of Labor Statistics and American Trucking Associations (ATA) TRAC report 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2003 2001 1999 1998 1997 90 1996 98.3 99.4 2002 99.9 2000 100 143.1 139.4 2004 Index Value (1996 = 100) Reefer Rates: Up 6.5% Since 2008; Food CPI Up 13.1% 21 Organic Food Sales Have Grown ~8% Annually Since 2010 • In 1997, sales of organic foods were just $3.4B; last year they were $35.9 U.S. Organic Food Sales ($ billions) 40 36.0 35 • Spending on organic foods represented almost 5% of total food sales in 2014, up from 1% in 1997 • Sales of organic fruits and vegetables grew 12% last year to $13B while organic dairy sales rose 11% to nearly $5.5B. Source: Organic Trade Association 30 23.6 25 20 15 26.7 29.2 17.2 12.0 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 22 US-Mexico Food Trade is Growing Rapidly Even with the “great recession”, food trade between the US and Mexico has averaged 10.2% annual growth 3 of 5 years since “great recession” food trade has exceeded 16% Since 2004, exports have grown 9.9% annually while imports have averaged 10.5% annual growth 30 25 11.2% 20 11.4% 15 10 16.0% 15.2% 15.6% 12.4% 9.8% 15.8 26.5 17.9 10% 6.3% 10.0 2.8% 5 (2.5%) US-Mexico Food Trade (Truck Only; $B) Source: U.S. Department of Transportation, Bureau of Transportation Statistics; YTD 2015 is through April 15% 21.9 12.8 0 20% 17.5% 4.9% 9.8 5% 0% (5%) % Chg Yr/Yr 23 HOS Impact: Much Greater than the 3% “Conventional Wisdom” Conventional wisdom is that solo operations were impacted by 2.5%– 3% Team operations were impacted 4%–4.5% 50% 45% 40% Our survey work suggests those figures were low Practically speaking, between the restart provision and the 30minute break, the 3% figure didn’t make sense 30% Given the market tightness, we believe the 3% figure was low 20% Suspension of restart could free up 2%–3% capacity 26% 15% 14% 10% 0% to 2% 3% to 4% Source: BB&TCM survey of ~100 carriers in August 2014. Measures weekly miles per truck impact. Photo from Microsoft Office 2010. 5% to 8% Over 8% 24 Driver Miles Equals Driver Smiles • • • • • • A Prep time = pre-trip inspection, fueling, drug July’13-Dec’14 tests, DOT inspections HOS: More like PT = breaks, meals, communications, route 6.5 hours until planning, logging suspension Time at S/R = inefficient appointments, paperwork, check-in, check-out DTE = holidays, surges, traffic, day of week booking, 438 (7.3 network changes UT = appointment times, hours) parking issues, fatigue, 70hour rule, planning uncertainty, day of week bookings DT = Most fleets believe they can add 30–75 minutes with shipper/receiver help Driver's 14-Hour Day (840 minutes) 30 Prep Time 90 120 Personal Time 108 Time at Shipper/Receiver 48 Drive Time Empty Unused Time Drive Time Note: 660 available drive time minutes per day Source: BB&TCM and a large private fleet, sub-90 OR 25 E-Commerce: Behavior’s Impact on Freight Flows Source: Microsoft Office 2010 for photos 26 Here’s What’s Being Bought Online • 5 of the fastest-growing product sales are diapers, toiletries, pet food, bottled water and computer printing paper!!! E-Commerce as a Percentage of Overall Spending by Type of Good (2013) Books 39% Electronics 24% Baby 23% Toys 22% Sporting Goods 16% Appliances 14% Clothing Pet 11% Personal Care 7% Furniture 4% Groceries 2% 0% Source: BB&TCM research of a variety of information Preliminary figures: Groceries are now at 3.5% & furniture at 8% 13% 10% 20% 30% 40% 50% 27 Capacity: Prolonged Crunch, or Rolling Headaches in 2014–2017? Source: BB&TCM/Thom Albrecht for cartoon on left; Transport Topics for cartoon on right 28 Psst…Drivers are Older-Not Just Carrier Rhetoric! 21 years ago 30% of the drivers were 25 to 34 years old Today, they are less than 16% 21 years ago 9% of drivers were 55 to 64 years old Today, they are 20% 35% 30% 25% 20% 15% 10% 5% 0% 20-24 yrs 25-34 yrs 35-44 yrs 45-54 yrs 55-64 yrs 2013 4.9% 15.6% 24.0% 29.3% 20.1% 2003 5.6% 21.7% 28.7% 26.1% 14.0% 1994 9.2% 30.4% 29.5% 20.0% 9.1% Sources: ATA , ATRI and BB&TCM analysis 65+ yrs 6.1% 2.8% 1.9% 29 It’s Paid to be Almost Anything but a Driver! $19 Indexed Wage (1999 = 1.0) $19.68 $22 $21.38 $25 1.6 1.5 $21.96 $28 $24.81 40 Years of Ugly!--Average Hourly Driver Wages 1.4 1.3 1.2 $16 1.1 $13 1.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2011 2006 2001 1996 1991 1986 1981 1976 $10 Heavy and Tractor-Trailer Truck Drivers Construction Laborers Food Prep and Serving Related Occupations Automotive Service Technicians and Mechanics Registered Nurse Source: BB&TCM analysis, Bureau of Labor Statistics; photo from Microsoft Office 2010. Chart on left is inflation-adjusted. 30 Is the Driver Challenge Worse? Yes and No … • • • • Q4’04 tied for worst turnover last cycle, while Q3’04 was the 3rd worst Driver turnover was >100% 24 out of 25 quarters last cycle; it remains below 100% this cycle No, it’s not different: Pay raises immediately helped truck count (see right chart) Yes, it’s different: What constitutes an acceptable driver hire has totally changed the last ten years 110% Large TL Turnover Small TL Turnover 105% 100% 97% 95% 92% 90% 85% 79% 80% 78% 75% 70% 74% 1400 1200 1000 800 97% 96% 600 94% 94% 95% 400 96% 91% 1600 Large Fleet Pay Raises Began in Earnest in Q2’14; Maybe Small Fleets Couldn’t Keep Up? 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 14:Q4 200 160% 136% 121% 140% 120% 759 96% 97% 96% 96% * 589 336 370 0 (16) -200 Q3'04 Q4'04 80% 60% 40% Q2'14 Q3'14 Q4'14 Q1'15 20% -400 -600 100% (463) Truck Adds/(Deletions) 0% Driver Turnover Source: BB&TCM analysis of public carriers CGI, CVTI, JBHT (truck only), KNX, MRTN, SWFT, WERN and 2 private carriers; photo from BB&TCM; for Q4’14, we estimate that ~1,050 tractor additions were from acquisitions, implying organic growth of 370 units. Total for the group was 1,435 including acquisitions. Cartoon from Transport Topics. 31 Timetable for 7 Key Future Regulations o ELD rule by September 30, 2015; mandated by Sept. 2017 o NHTSA to publish speed limiters around July 27, 2015 o Carrier safety fitness determination rule to be published on August 17, 2015 (we’ll see) o CDL drug and alcohol clearinghouse rules to be published Sept. 30, 2015 o Rule prohibiting coercion of drivers by carriers and brokers to be published by September 10, 2015 (likely to be delayed) o Minimum insurance proposal likely to be raised; announcement in the summer or fall? o Hair follicle test to be discussed by FMCSA; Key #s: at Schneider 120 pre-employment drivers failed drug urine test; 1,400 failed hair follicle; JBHT: 110 and 3,845! Source: BB&TCM photo; regulations from the government’s advance notice of public rulemaking (ANPRM) 32 Closing Thoughts “We can’t solve problems by using the same kind of thinking we used when we created them” — Albert Einstein “If You’ve Got the Bucks, We’ve Got the Trucks!” — overheard at a trade show “A cynic knows the price of everything and the value of nothing” — Help your customers not be this person! 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 $170,000. No wonder you have a headache! Source: Cartoon from Transport Topics 33 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 July 1, 2015): All companies under coverage: Buy (1) Hold (2) Underweight/Sell (3) Not Rated (NR) 44.63% 53.75% 1.30% 0.33% All companies under coverage to which it has provided investment banking services in the previous 12 months: Buy (1) 23.36% Hold (2) 21.82% Underweight/Sell (3) 25.00% 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 July 1, 2015 BB&T Capital Markets makes a market in the securities of ArcBest Corporation, American Railcar Industries, Inc., 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 Covenant Transportation Group, Inc., Echo Global Logistics, Inc., Heartland Express, Inc. and Trinity Industries, Inc. in the last 12 months. BB&T Capital Markets has received compensation for investment banking services from Covenant Transportation Group, Inc., Echo Global Logistics, Inc., Heartland Express, Inc. and Trinity Industries, Inc. in the last 12 months. BB&T Capital Markets expects to receive or intends to seek compensation for investment banking services from ArcBest Corporation, American Railcar Industries, Inc., Celadon Group, Inc., C. H. Robinson Worldwide, Inc., Conway 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, American Railcar Industries, Inc., 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. 34 The Outlook of Refrigerated Trucking: From a Financial Analyst Perspective