Schneider National, Inc. · NYSE:SNDR
Schneider National — Investor Presentation (September 2015)
40 slides from Schneider National's investor presentation, September 2015
Slide 1: The Lull of 2015 and What to Expect in 2016-2018
The Lull of 2015 and What to Expect in 2016-2018 “A pessimist sees the difficulty in every opportunity; an optimist sees opportunity in every difficulty.” -Winston Churchill Agenda: Market Conditions: The Lull & Capacity The Economy: Beyond the Obvious Drivers and all the Rhetoric Capacity Crunch &
Slide 2: The Economy: Stuck Between a Square Root and a Hockey Stick Recovery
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
Slide 3: What's Behind the 2015 Lull
What’s Behind the 2015 “Lull” 2014 (the “Perfect Storm”) 2015 (“less than perfect”) • HOS carryover from H2’13 • HOS restart to pre-July 2013 • Awful Q1’14 weather • Class 8 tractor growth of 4.7% in • Almost no pricing in 2012-2013 last 12 months • Lousy rail service • The “creeping regulatory crun
Slide 4: Lull #1: Industrial Production Slumped (Think Oil)
Lull # 1: Industrial Production Slumped (Think ‘Oil’) When IP dips below 3%, freight Industrial Production (Green) and Real GDP (Blue) Seas adj.; quarterly changes are at annual rates volumes get choppy In the five quarters before Q4’13, IP 7% averaged 1.6% growth, with one 6% 5.7% quarter (Q1’1
Slide 5: Lull #2: Exports Have Been Hurt by Strong Dollar
Lull #2: Exports Have Been Hurt by Strong Dollar Exports’ Contribution to Real GDP Growth • The strong dollar has hurt the 1.5% demand for U.S. exports, making our 1.28% products more expensive to overseas buyers 1.0% 0.71% 0.65% • Many international economies have 0.5% slowed, a separate issue from
Slide 6: Lull #3: Class 8 Fleet up 4.7% in Last Year, But…
Lull #3: Class 8 Fleet up 4.7% in Last Year, But… This includes all tractors, even N.A. Class 8 Tractor Fleet (Figs in 000s) 30 year old tractors 3,900 3,890 2.0% The “true” inter-city fleet 3,850 1.7% 1.8% (tractors 12 years old or 3,820 newer) probably grew 3%- 3,800 1.4% 3,780 1.5% 3.5% 3,750
Slide 7: Lull #4: HOS Impact Much Greater than 3% Conventional Wisdom
Lull #4: HOS Impact Much Greater than 3% “Conventional Wisdom” Conventional wisdom is that solo 50% operations were impacted by 2.5%– 3% 45% Team operations were impacted 4%–4.5% 40% Our survey work suggests those figures were low Practically speaking, between the 30% restart provision and t
Slide 8: Case Study: Oil's 67% Slump in '85-'86; Parallels for Now?
Case Study: Oil’s 67% Slump in ‘85-’86; Parallels for Now? IP Slumped After Oil Fell 67% 8% Oil fell from $30 to $10 ~ 8 to 9 8.9% 9% months in 1985-1986 7% 7.3% Oil’s collapse in 2H’85 and 1H’86 6% 7% 5.2% contributed to a slump in industrial 5% 4.2% 5.2% 5% production (IP) those 2 years…but 4%
Slide 9: The Economy: Beyond the Obvious
The Economy: Beyond the Obvious Source: Microsoft Office 2010 for cartoons 9
Slide 10: Spending Patterns Have Changed Since 2007
Spending Patterns Have Changed Since 2007 o The three fastest-growing Changes in Spending by Middle-Income Americans 2013 vs. 2007 areas of spending for Americans create little Home Internet 81.3% Cellular Phones 49.1% freight per se Health Insurance 42.1% Homes (Rent) 26.0% Health Care 24.2% o Reme
Slide 11: Housing Percolating, but Auto Leveling Off
Housing Percolating, but Auto Leveling Off Housing permits are picking up Housing Permits 1,337 1,170 after a 2-year stall in 2013-2014 1,016 1,500 Auto production is up 100% since a 1,000 624 2009 low (and 48% since 2011) but is beginning to level off; 1%–4% 500 unit growth from here on out? 0
Slide 12: Exploring the Percolating Housing Market
Exploring the Percolating Housing Market • U.S. residential permits are up Building Permits Issued 14.6% YTD vs. +5.6% in 2014 2013 2014 2014 YTD 2015YTD • June permits of 1.337M highest U.S. 990,822 1,046,363 603,969 692,132 since July ’07 at 1.361M +19.4% +5.6% +14.6% 4 Key Energy 177,057 198,061
Slide 13: Financial Obligations Ratio
Debt Service Ratio 9.5 10.5 11.5 12.5 13.5 9 10 11 12 13 14 1980Q1 1981Q1 1982Q1 1983Q1 1984Q1 1985Q1 1986Q1 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 Debt Service Ratio 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 Fina
Slide 14: …And Bank Lending is Growing
…And Bank Lending is Growing 4.0% 2014 & Q2'15 (red) Credit cards Credit cards 3.8% 5.2% 4.0% Consumer Consumer 4.5% 2.5% 5.2% RE loans RE loans 4.1% 12.1% 2.5% C&I loans C&I loans 11.0% 12.1% -20% -10% 0% 10% 2014 2013 2012 2011 2010 2009 0% 5% 10% 15% Source: Federal Reserve Board. C&I = commercia
Slide 15: Long-Term Positive: Household Formations Trending Up
Long-Term Positive: Household Formations Trending Up Household Formation Ratio to Housing Starts 1996 43% Household Formations 94% 2,500 1998 93% 2,000 82% 2000 53% 1,500 219% 1,000 2002 64% 500 107% 0 2004 37% (500) 65% 2006 58% Q1'15 Q2'15 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'1
Slide 16: 3D Printing: Some Industries More Suitable Than Others
3D Printing: Some Industries More Suitable Than Others Shorter supply chains Toys Electronic Production located closer Equipment Footwear High to end consumer/user Ceramic Suitability for 3D Printing Computers Fewer prototypes needed Glass Auto Parts Products for final manufacturing Plastics A
Slide 17: Capacity: All Sorts of Influences
Capacity: All Sorts of Influences Source: Microsoft Office 2010 for photo 17
Slide 18: East Coast Ports Probably Permanently Grabbed 3% to 5% Share
East Coast Ports Probably ‘Permanently’ Grabbed 3% to 5% Share February 2015 survey of 70% 65.0% 64.0% 403 shippers and 191 3PLs 63.7% 59.2% indicate they plan to migrate, 60% on average, 20% of their 55.0% volumes from West to East 50% 45.0% 40% of shippers using only 40% the West Coast plan to
Slide 19: Shipments: LTL Led in 2014; Reefer Leads in 2015
Shipments: LTL Led in 2014; Reefer Leads in 2015 Total TL Loads Van Flatbed Reefer LTL Tank 20% 14.9% 15% 14.2% 12.0% 10% 6.1% 6.2% 6.6% 6.8% 5% 3.5% 2.7% 3.0% 3.5% 2.4% 2.5% 1.3% 1.1% 2.4% 1.8% 2.1% 1.1% 1.1% 2.2% 1.1% 1.2% 0.3% 0% -1.5% -1.4% 2011 2012 2013 2014 2015 YTD -3.0% -3.7% -5% -4.4% -4.7
Slide 20: LTL Has Been Growing Faster than TL Since the Great Recession
LTL Has Been Growing Faster than TL Since the Great Recession Inflation-adjusted LTL shrank from 1980-2010 Van LTL Since 2011 LTL has grown 14% faster than van TL 12% 12.0% LTL is no longer in 10% secular decay-Why? 8% e-Commerce 6.8% More of an industrial 6% recovery vs. consumer 4% 3.0%
Slide 21: LTL Capacity: Pup Trailers Off 10.5% from '06-'07 Peak
LTL Capacity: Pup Trailers Off 10.5% from ’06-’07 Peak 365,414 411,440 368,114 LTL trailer population at year- 450,000 end 2014 was about where it 400,000 was in 1998; it grew 1.3% in ‘14 350,000 Trailers are forecast to grow 2.5% in 2015 and 2.6% in 2016 300,000 (or ~9,000 to 10,000 units each
Slide 22: The Top 10 LTL Carriers Have Gained 10 Share Points
The Top 10 LTL Carriers Have Gained 10 Share Points 100% 90.1% 88.8% 89.5% 91.1% 90% 86.8% 87.5% 87.6% 80% 72.5% 72.8% 72.9% 74.3% 70.6% 70% 64.5% 62.6% 60% 50% Top 25 40% Top 10 30% 20% 10% 0% 2008 2009 2010 2011 2012 2013 2014 Source: SJ Consulting and BB&TCM analysis. Microsoft Office 2010 for ph
Slide 23: E-Commerce: Behavior's Impact on Freight Flows
E-Commerce: Behavior’s Impact on Freight Flows Source: Microsoft Office 2010 for photos 23
Slide 24: Here's What's Being Bought Online
Here’s What’s Being Bought Online E-Commerce as a Percentage of Overall Spending by • 5 of the fastest-growing Type of Good (2013) product sales are diapers, toiletries, pet food, bottled Books 39% water and computer Electronics 24% printing paper!!! Baby 23% Toys 22% Sporting Goods 16% Appliances 1
Slide 25: The Truth About Truck Drivers
The Truth About Truck Drivers Source: photo from BB&TCM 25
Slide 26: Drivers are Older-Not Just Carrier Rhetoric!
Psst…Drivers are Older-Not Just Carrier Rhetoric! 35% 21 years ago 40% of the drivers were 20 30% to 34 years old 25% Today, they are less 20% than 21% 15% 21 years ago 11% of drivers were 55 or 10% older 5% Today, they are 26% 0% 20-24 yrs 25-34 yrs 35-44 yrs 45-54 yrs 55-64 yrs 65+ yrs 201
Slide 27: Why Drivers Leave Their Jobs (Pay & Respect)
Why Drivers Leave Their Jobs (Pay & Respect)—It’s a Shipper Why Did You Leave Your Last Trucking Job? Problem, not Just a Carrier Problem Does the shipper 42.9% Pay 38.0% value a driver’s time? 29.8% 34.1% Bathrooms, phones Lack Of Recognition & Respect 23.8% WiFi availability Didn't Get Home
Slide 28: Driver Miles Equals Driver Smiles
Driver Miles Equals Driver Smiles • Prep time = pre-trip A Driver's 14-Hour Day (840 minutes) inspection, fueling, drug tests, DOT inspections July’13-Dec’14 30 Prep Time • PT = breaks, meals, HOS: More like communications, route 6.5 hours until planning, logging 90 suspension Personal Time • Time a
Slide 29: Years of Ugly! Average Hourly Driver Wages
It’s Paid to be Almost Anything but a Driver! 40 Years of Ugly!--Average 1.6 Hourly Driver Wages $24.81 $28 1.5 $21.96 $25 Indexed Wage (1999 = 1.0) $21.38 1.4 $19.68 $22 1.3 $19 1.2 $16 1.1 $13 1.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Heavy and Tractor-Trailer
Slide 30: Is the Driver Challenge Worse? Yes and No …
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 800 759 200% • helped truck count (see
Slide 31: Capacity: Prolonged Crunch, or Rolling Headaches in 2016–2018?
Capacity: Prolonged Crunch, or Rolling Headaches in 2016–2018? Tips for the Next Tight Patch Source: BB&TCM/Thom Albrecht for cartoon on left; Transport Topics for cartoon on right 31
Slide 32: Summary of Approximately 20 Pending Regulations
Summary of Approximately 20 Pending Regulations • Regulations are broken into 6 buckets: (1) CSA; (2) Immigration; (3) Health Regulations; (4) Employee Free Choice; (5) Drug & Alcohol Database; (6) Entry Proficiency • 6 areas reduce the active driver pool • 10 increase turnover or make hiring less p
Slide 33: Timetable for 8 Key Future Regulations
Timetable for 8 Key Future Regulations o ELD rule by October 30, 2015; mandated by October 2017 o NHTSA to publish speed limiters around September 21, 2015 o Carrier safety fitness determination rule to be published on September 30, 2015 (we’ll see) o CDL drug and alcohol clearinghouse rules to be p
Slide 34: 12-Step Program to Become a Shipper of Choice
12-Step Program to Become a Shipper of Choice 1. Payments in 30 days or less (70% of carrier of period gymnastics expenses due inside of 8 days); fair FSC (no BTF) 10. Use EDI; timely resolution of claims & payment 2. Weekend freight!!!!! Pick-ups and deliveries! issues; reasonable contract terms an
Slide 35: Creating Capacity Through Better Practices
Creating Capacity Through Better Practices Annual Miles Gained (000s) Opportunity Buckets • FAT: flexible appointment times (8K 9 to 9K annual miles) 9.5 • FLUT: faster loading & unloading times (11K to 12K) • ODAP: Onsite driver accommodations & parking (12,500 miles) • MDH: more drop & hook (9K to
Slide 36: Private In-House Fleet: To Grow or Not to Grow?
Private In-House Fleet: To Grow or Not to Grow? But It Has a Downside: • Insurance: BIPD and cargo claims • Litigation • Recruiting & retaining drivers; potential union challenges • Truck prices • EPA emissions standards have The Case for In-House Fleets: doubled truck inflation rate • More consiste
Slide 37: Shippers: Be Wary of the Procurement Trap
Shippers: Be wary of the Procurement Trap Procurement Mentality: The Problem : • Run competitive bids • Businesses: tend to be saddled with fixed costs and capital • Seek the lowest price investments OR people • Don’t discount overall challenges related to intellectual value but price is a big asset
Slide 38: Shipper Tips & Questions
Shipper Tips & Questions • Next day lane service is shortening-what does that mean for your network? • Many fleets tier driver pay: what tier of drivers are you getting? • Slip-seating: if HOS 1-5 a.m. restart is resumed, ask what fleets are doing to promote this from 1%-2% of trucks to 5%-10% • Flo
Slide 39: Closing Thoughts
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
Slide 40: Important Disclosures
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 September 21, 2015): All companies All companies under coverage to which it has p
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