THE GOOD, THE BAD, AND THE CHALLENGING Don Hill President, COO
WHO IS OUR INDUSTRY?
GOOD: TECHNOLOGY
GOOD: FUEL 2012 AVERAGE $3.97 2013 AVERAGE $3.92 2014 AVERAGE $3.83 Diesel Average per Gallon 2015 AVERAGE $2.71 2016 AVERAGE $2.16
GOOD: STRATEGIC PARTNERSHIPS A B C D E F G H I J k A B C D E F A B G C D E H F G I H J I
BAD: PRICING MODEL 2010-2015 COST & RATE INCREASES VS. PRICE INDICES PPI producer price index 13.91% CPI consumer price index 9.53% OUR COST COMPONENTS weighted average total direct cost increase 20.87% HISTORICAL GRI (GENERAL RATE INCREASE) net increase, after bottom line discount 3.45%
BAD: COST OF EQUIPMENT Our Components of Services- Increases 2010 2011 2012 2013 2014 2015 $ diff 2010-2015 % diff 2010-2015 Tractor Tractor, e.g., International ProStar 6x4 Tractor w/ MaxxForce 13L Average Marginal Costs Per Mile (Maint. and Repair) $115,000.00 $117,300.00 $119,646.00 $122,039.00 $124,480.00 $126,907.00 $11,907.00 10.35% $1,870.09 $2,110.96 $2,351.83 $2,592.69 $2,833.60 $3,144.12 $1274.03 68.13% 10.18% IRP Plates $1,708.00 $1,747.50 $1,787.00 $1,827.00 $1,867.00 $1,966.00 $258.00 15.11% Trailer (Includes Van Equipment) $53,684.10 $55,468.51 $58,034.26 $59,436.85 $62,852.00 $68,500 $14,815.90 27.60% Trailer Average Marginal Costs Per Mile (Maint. and Repair) $216.00 $229.00 $243.41 $257.02 $269.60 $284.99 $68.99 31.94% 21.71% Tires $372.00 $428.00 $471.00 $518.00 $539.00 $533.80 $161.80 43.49% Packing Packing Materials $510.00 $540.00 $570.00 $600.00 $630.00 $640.00 $130.00 25.49% 20.31%
BAD: COST OF EQUIPMENT Our Components of Services- Increases 2010 2011 2012 2013 2014 2015 $ diff 2010-2015 % diff 2010-2015 Tractor Tractor, e.g., International ProStar 6x4 Tractor w/ MaxxForce 13L Average Marginal Costs Per Mile (Maint. and Repair) Our Components of Services- Increases 2010 $115,000.00 $117,300.00 $119,646.00 $122,039.00 $124,480.00 $126,907.00 $11,907.00 10.35% $1,870.09 $2,110.96 $2,351.83 $2,592.69 $2,833.60 $3,144.12 $1274.03 68.13% Tractor Tractor, e.g., International ProStar 6x4 Tractor w/ MaxxForce 13L Average Marginal Costs Per Mile (Maint. and Repair) $115,000.00 $1,870.09 IRP Plates $1,708.00 $1,747.50 $1,787.00 $1,827.00 $1,867.00 $1,966.00 $258.00 15.11% 10.18% Trailer Packing Trailer (Includes Van Equipment) Average Marginal Costs Per Mile (Maint. and Repair) $53,684.10 $55,468.51 $58,034.26 $59,436.85 $62,852.00 $68,500 $14,815.90 27.60% $216.00 $229.00 $243.41 $257.02 $269.60 $284.99 $68.99 31.94% Tires $372.00 $428.00 $471.00 $518.00 $539.00 $533.80 $161.80 43.49% Packing Materials $510.00 $540.00 $570.00 $600.00 $630.00 $640.00 $130.00 25.49% Trailer IRP Plates $1,708.00 Trailer (Includes Van Equipment) Average Marginal Costs Per Mile (Maint. and Repair) $53,684.10 $216.00 21.71% 20.31% Tires $372.00 Packing Packing Materials $510.00
BAD: COST OF EQUIPMENT Our Components of Services- Increases 2015 $ diff 2010-2015 % diff 2010-2015 Our Components of Services- Increases 2010 2011 2012 2013 2014 2015 $ diff 2010-2015 % diff 2010-2015 Tractor Trailer Packing Tractor, e.g., International ProStar 6x4 Tractor w/ MaxxForce 13L Average Marginal Costs Per Mile (Maint. and Repair) Tractor $115,000.00 $117,300.00 $119,646.00 $122,039.00 $124,480.00 $126,907.00 $11,907.00 10.35% $1,870.09 $2,110.96 $2,351.83 $2,592.69 $2,833.60 $3,144.12 $1274.03 68.13% IRP Plates $1,708.00 $1,747.50 $1,787.00 $1,827.00 $1,867.00 $1,966.00 $258.00 15.11% Trailer (Includes Van Equipment) Average Marginal Costs Per Mile (Maint. and Repair) $53,684.10 $55,468.51 $58,034.26 $59,436.85 $62,852.00 $68,500 $14,815.90 27.60% $216.00 $229.00 $243.41 $257.02 $269.60 $284.99 $68.99 31.94% Tires $372.00 $428.00 $471.00 $518.00 $539.00 $533.80 $161.80 43.49% Packing Materials $510.00 $540.00 $570.00 $600.00 $630.00 $640.00 $130.00 25.49% Trailer Tractor, e.g., International ProStar 6x4 Tractor w/ MaxxForce 13L Average Marginal Costs Per Mile (Maint. and Repair) IRP Plates Trailer (Includes Van $126,907.00 $11,907.00 10.35% $3,144.12 $1274.03 68.13% $1,966.00 $258.00 15.11% Equipment) $68,500 $14,815.90 27.60% Average Marginal Costs Per Mile (Maint. and Repair) $284.99 $68.99 31.94% 10.18% 21.71% 10.18% 21.71% 20.31% Tires $533.80 $161.80 43.49% Packing Packing Materials $640.00 $130.00 25.49% 20.31%
BAD: COST OF INSURANCE COVERAGE Our Components of Services- Increases 2010 2011 2012 2013 2014 2015 $ diff 2010-2015 % diff 2010-2015 Family Medical Coverage $1,171.00 $1,263.30 $1,355.60 $1,447.90 $1,540.20 $1,649.42 $478.42 40.86% Insurance Single Medical Coverage $403.08 $423.58 $444.05 $464.55 $485.00 $507.96 $104.88 26.02% Worker s Comp (billions) $29.9 $32.3 $35.1 $36.9 $38.5 $40.48 $10.58 35.38% 15.38% BIPD, Auto, Umbrella $2,489.00 $2,512.00 $2,591.00 $2,588.00 $2,616.00 $2,639.00 $150.00 6.03%
BAD: COST OF INSURANCE COVERAGE Our Components of Services- Increases 2010 Our Components of Services- Increases 2010 2011 2012 2013 2014 2015 $ diff 2010-2015 % diff 2010-2015 Insurance Family Medical Coverage $1,171.00 $1,263.30 $1,355.60 $1,447.90 $1,540.20 $1,649.42 $478.42 40.86% Single Medical Coverage $403.08 $423.58 $444.05 $464.55 $485.00 $507.96 $104.88 26.02% Worker s Comp (billions) $29.9 $32.3 $35.1 $36.9 $38.5 $40.48 $10.58 35.38% BIPD, Auto, Umbrella $2,489.00 $2,512.00 $2,591.00 $2,588.00 $2,616.00 $2,639.00 $150.00 6.03% Insurance Family Medical Coverage $1,171.00 Single Medical Coverage $403.08 Worker s Comp (billions) $29.9 15.38% BIPD, Auto, Umbrella $2,489.00
BAD: COST OF INSURANCE COVERAGE Our Components of Services- Increases 2010 2011 2012 2013 2014 2015 $ diff 2010-2015 % diff 2010-2015 Insurance Family Medical Coverage $1,171.00 $1,263.30 $1,355.60 $1,447.90 $1,540.20 $1,649.42 $478.42 40.86% Our Components of Services- Increases 2015 $ diff 2010-2015 % diff 2010-2015 Single Medical Coverage $403.08 $423.58 $444.05 $464.55 $485.00 $507.96 $104.88 26.02% Family Medical Coverage $1,649.42 $478.42 40.86% Worker s Comp (billions) $29.9 $32.3 $35.1 $36.9 $38.5 $40.48 $10.58 35.38% 15.38% Insurance BIPD, Auto, Umbrella $2,489.00 $2,512.00 $2,591.00 $2,588.00 $2,616.00 $2,639.00 $150.00 6.03% Single Medical Coverage $507.96 $104.88 26.02% Worker s Comp (billions) $40.48 $10.58 35.38% 15.38% BIPD, Auto, Umbrella $2,639.00 $150.00 6.03%
CHALLENGING: REGULATION LABOR FMCSA Hours of Service Regulations Annual loss of 1.64 weeks per van operator (3.57% labor increase) TRACTOR CARB Emission Standard (California) 6.03% increase in Truck Cost (1/2 of Fleet) More increases likely as other states follow ELECTRONIC LOGGING DEVICE (ELD) Implementation December 2017 Additional loss of working hours
CHALLENGING: DEMOGRAPHICS OF BUSINESS FOOD JOB COLLEGE WIFE & KIDS AGES 18-44 MOVE 9.1 TIMES AGES 45+ MOVE 2.7 TIMES PEOPLE MOVE AN AVERAGE OF 11.7 TIMES IN THEIR LIFETIME statistic from: US Census Bureau
CHALLENGING: MODEL CHANGE CHALLENGES Hours of service Smaller moves Cost of capital equipment Lack of work force Lack of net revenue Rate pressure Regulation Short season IDEAS Technology Cloud based tools Application technology Container transportation Rail and other means of moving
ADDRESSING NEW FORMS OF COMPETITION
If it doesn t challenge you, it doesn t change you. Fred DeVito