THANK YOU SPONSORS 2

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1 1

2 THANK YOU SPONSORS 2

3 Maximize Value in the Short-Term for Long-Term Gains Tim Almack: Lead Transportation Partner at Katz Sapper & Miller David Roush: President at KSM Transport Advisors 3

4 Founded in 1942 Public accounting firm headquartered in Indianapolis, Indiana, with offices in New York City and Fort Wayne Provide a full range of auditing, accounting, tax, and consulting services 45 partners and 400+ total employees Work with more than 110 transportation and logistics companies located throughout the United States Actively involved in 18 state trucking associations and various national associations (ATA, TCA, NTTC, and others) Our Mission: INSPIRING GREAT PEOPLE TO DO GREAT THINGS Our Values: Unity Nurturing Ingenuity Trust Excellence Drive

5 KSM VISION: Be Problem Solvers For Our Clients As We Assist Them In Furthering Their Growth And Success. When you look at the books, that s just an arithmetical process. To understand what the numbers mean, you have to look beyond the numbers. You have to see the business at work. - Irwin Katz, Katz, Sapper & Miller

6 KSMTA helps trucking companies make more money by focusing on our clients major drivers of profitability: Freight Network Driver Recruiting and Retention Maintenance IT Infrastructure Operational Accounting and Metrics

7 AGENDA What is driving this crazy trucking market Four ideas for investment in your trucking company Bridging the Knowing Doing Gap 7

8 The Best Trucking Market (for truckers) Ever??? 8

9 THE DRIVERS OF TRUCK FREIGHT ARE SOLID Sources: BEA & ATA 9

10 WHERE ARE TRUCKING FUNDAMENTALS TODAY? Source: Stephens Inc. 10

11 FUNDAMENTALS ARE STRONG FOCUS IS NOW ON DURATION Source: Trans4cast and Stephens Inc. 11

12 TOTAL FOR-HIRE TL LOADS Index: January 2010=100; 3-Month Moving Average Includes Dry Van, Flatbed, Temp Controlled, and Tank Truck Source: ATA s Trucking Activity Report 12

13 LTL TONNAGE Index: 2010=100; 3-Month Moving Average Source: ATA s Trucking Activity Report 13

14 CONTRACT FOR-HIRE TRUCKLOAD REVENUE PER MILE X FSC Source: ATA s Trucking Activity Report 14

15 STEPHENS TRUCKLOAD RATE INDEX Source: Company Filings and Stephens Inc. Note: Stephens TL Rate includes CVTI, HTLD, KNX, MRTN, USAK, and WERN 15

16 FOR-HIRE TL TRACTOR CHANGES: LARGE VS SMALL FLEETS Source: ATA s Trucking Activity Report 16

17 SUPPLY DYNAMICS CLASS 8 DATA Source: Public filings and Stephens Inc. 17

18 SUPPLY DYNAMICS COST PRESSURES VS. RATE INDEX Source: Public filings and Stephens Inc. 18

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20 TCA PROFITABILITY PROGRAM (TPP) The Best Practice Groups (established 2002) 82 Member Companies - 8 Groups (by Operating Mode) Meet 2-3 times per year Compare results and Share Best Practices and Ideas ingauge cloud-based Benchmarking Platform 167 company profiles External and Internal Benchmarking Multiple data visualization tools Unlimited users / Unlimited profiles TPP Profitability Seminars Quarterly Topic-Specific Seminars 20

21 TCA PROFITABILITY PROGRAM BEST PRACTICE GROUPS 21

22 INGAUGE THE MAIN STREET OF TRUCKING Source: TCA Profitability Program 22

23 TPP20 REVENUE PER DRIVER PER WEEK $3, $3, $3, $3, $3, $3, $3, $3, $3, $3, $3, $3, $3, $3, $3, Q Q Q Q Q Source: TCA Profitability Program 23

24 TPP20 DRIVER TO NON-DRIVER RATIO (CF & OO) Q Q Q Q Q Source: TCA Profitability Program 24

25 TPP20 OPERATING RATIO 99.00% OPERATING RATIO (CF & OO) 98.36% 98.00% 97.00% 97.03% 96.00% 95.00% 94.00% 94.21% 94.85% 93.55% 95.00% 94.65% 93.00% 92.00% 91.00% Q Q Q Q Q Mar-17 Mar-18 Source: TCA Profitability Program 25

26 TPP20 GROSS MARGIN 20.00% 18.00% 16.00% 15.95% 18.57% 17.93% GROSS MARGIN (CF & OO) 18.48% 17.34% 14.88% 18.45% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Q Q Q Q Q Mar-17 Mar-18 Source: TCA Profitability Program 26

27 THE OUTLIERS ONCE IN A GENERATION RESULTS? Six companies have reported Operating Ratios in mid to low 60 s since March Gross Margins in upper 30 s All verified 27

28 Drivers are the Primary Supply Constraint 28

29 U.S. ECONOMY IS AT FULL-EMPLOYMENT Source: Department of Labor 29

30 SUPPLY DYNAMICS HIGH AVG. DRIVER AGE & LOW INDUSTRY PAY Source: U.S. Bureau of Labor Statistics, Current Population Survey (CPS) and Stephens Inc. 30

31 ATA DRIVER COMPENSATION STUDY Source: ATA s 2017 Driver Compensation Study 31

32 TRUCK DRIVER TURNOVER RATES Source: ATA 32

33 TPP20 DRIVER TURNOVER 70.00% 68.50% 65.00% 60.00% 55.00% 55.18% 58.68% 60.45% 62.14% 57.26% 61.73% 50.00% 45.00% 40.00% Q Q Q Q Q Source: TCA Profitability Program 33

34 DRIVER SHORTAGE Source: ATA s Truck Driver Shortage Analysis

35 35 Source: U.S. Department of Labor

36 36 Source: ATA s Truck Driver Shortage Analysis 2017

37 Use the Greatest Trucking Market to Invest in Your Company 37

38 FOUR INVESTMENT OPPORTUNITIES Balance Sheet Freight Network Drivers Team and Culture 38

39 Balance Sheet Reduce leverage via accelerated debt repayment Succession or exit strategy Rolling Stock IT Infrastructure Clean up Accounts Receivable Avoid the temptation to buy toys 39

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41 Freight Network Operate within a defined, engineered, strategic geographic footprint Use math rather than intuition to determine capacity allocations and pricing Align with profitable driver friendly shippers Continuously monitor and manage with freight network KPI s 41

42 Drivers Identify areas of conflict and irritation to improve retention Utilize technology to identify, attract, recruit, and hire the right drivers Develop and demand a driver focused culture Benchmark driver pay on a quarterly basis 42

43 Great things in business are never done by one person. They re done by a team of people - Steve Jobs 43

44 Team and Culture Upgrade your team where necessary; make the tough leadership changes Use an internal or external recruiter to source new hires Ensure your team has the tools and training they need to succeed Create a safety and people focused culture and lead by example; EVERYONE needs to participate 44

45 Basic research is what I am doing when I don t know what I am doing. - Wernher von Braun When one door closes, another opens; but we often look so long and so regretfully upon the closed door that we do not see the one which has opened for us. - Alexander Graham Bell Being willing is not enough. We must do. - Leonardo da Vinci It s not knowing what to do, it s doing what you know. - Tony Robbins If you don t know where you re going, every road will get you nowhere. - Henry A. Kissinger 45

46 1. Why Before How: Philosophy Is Important 2. Knowing Comes From Doing And Teaching Others How 3. Action Counts More Than Elegant Plans and Concepts 4. There Is No Doing Without Mistakes. What Is The Company s Response 5. Fear Fosters Knowing-Doing Gaps, So Drive Out Fear 6. Fight The Competition, Not Each Other 7. Measure What Matters 8. What Leaders Do, How They Spend Their Time And How They Allocate Resources Matters 46

47 THANK YOU Tim Almack Partner Katz, Sapper & Miller David Roush President KSM Transport Advisors